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Module A · Market Foundations·Lesson 3

Pips, Lots & Leverage

Master the units of measurement in forex trading

4 sections · 3 quiz questions · ~5 min read

Guided course path

Keep pips, lots & leverage inside the live track.

You are reading a reference lesson. The live course path gives you the lesson order, checks, saved progress, and next step. This starts with the basic market language before pips, lots, leverage, and broker mechanics.

Closest track: Market Foundations + Forex MechanicsFirst lesson: What a financial market is
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What Is a Pip?

A pip (Percentage in Point) is the smallest standard price movement in forex. For most pairs, it's the 4th decimal place: a move from 1.0850 to 1.0851 is 1 pip. For JPY pairs, it's the 2nd decimal (110.50 to 110.51).
Wick points at a chalkboard showing 1.0850 to 1.0851 equals one pip, and 110.50 to 110.51 for yen pairs, teaching how to count the smallest standard move.Counting pips1.0850 → 1.0851= 1 pipJPY: 110.50 → 110.51
Wick saysA pip is the 4th decimal on most pairs and the 2nd decimal on yen pairs.

Lot Sizes

Trades are measured in lots. A Standard lot = 100,000 units, Mini lot = 10,000 units, Micro lot = 1,000 units. On a standard lot in EUR/USD, 1 pip = $10. On a micro lot, 1 pip = $0.10.
Wick shows three cards for standard, mini and micro lots with their unit sizes and pip values on EUR/USD, teaching that smaller lots mean smaller moves in dollars.Standard100,000units, $10a pipMini10,000units, $1 apipMicro1,000units,$0.10 a pip
Wick saysLot size sets how much each pip is worth, from $10 on a standard to $0.10 on a micro.

Understanding Leverage

Leverage lets you control a large position with a small deposit (margin). With 1:100 leverage, $1,000 in your account controls $100,000. This amplifies both profits AND losses — it's a double-edged sword.
Wick watches a small $1,000 block lift a big $100,000 block on a seesaw marked 1:100, showing how leverage magnifies every move in both directions.Grows losses as much as gains1:100$1,000$100,000?
Wick saysLeverage lets a small deposit control a big trade, so losses grow just as fast as gains.

Margin & Margin Calls

Margin is the deposit required to open a leveraged position. If your losses approach your margin, you get a margin call — the broker may close your positions. Always know your margin level and never risk more than you can afford.
Quick check

Did it stick?

Try to answer each one before you peek at the explanation.

1

How much is 1 pip worth on a standard lot (100,000 units) of EUR/USD?

2

Leverage only amplifies profits, not losses.

3

With 1:50 leverage, how much capital does $2,000 control?