Face Value

In some forex trading platforms, trades are executed in standard sizes of 10,000 base currency per one lot, but in other platforms, trades are executed in standard sizes of 100,000 base currency per one lot. Therefore, there is no universal definition of what a “standard-sized” lot is, even though a “standard lot” typically refers to a trade size of 100,000 base currency units in the realm of retail currency trading.

If you want to buy 100,000 EUR/USD, you are actually buying 100,000 Euros. But if your account is denominated in US dollars, then the amount that this position would take up in your account would be however much 100,000 Euros is equivalent to in US dollars at the time. At the same time that you have bought 100,000 Euros, you have sold an amount of US dollars to get this 100,000 Euros. There is usually no maximum trading size, but some some brokers require that you request for a quote over the telephone for trading sizes bigger than 10,000,000 base currency units.

What is a Pip?

A “pip” is the smallest price unit in any currency pair. For example, a movement from 1.5210 to 1.5211 in EUR/USD is one pip, making a pip equivalent to 0.0001. On the other hand, a movement from 105.35 to 105.36 in USD/JPY is also one pip, making a pip equivalent to 0.01.

Relating Pips to Value

For currency pairs where the counter currency is the US dollar like EUR/USD or GBP/USD, one pip equals US$10, for every 100,000 in face value.

So if you have traded one standard lot of GBP/USD, and you have a 20 pip profit, you would get 20 x US$10, which is US$200 profit. However, if you are trading a sub-standard lot of 10,000 in face value, then your profit would be ten times less the amount of that for a standard lot.

If the US dollar is not the counter currency in currency pairs, the value of a pip will be in whatever the counter currency is. In most online trading platforms, you will have access to a pip calculator to calculate for you how much that pip value is when converted to the US dollar if your account is in US dollars.