hey everybody I'm Rob Booker inventor of the paperclip that's not actually true welcome back to our FX trading 101 lessons I'm happy to be here thanks to our sponsor Forest Park FX pip value it's the question on everyone's mind how much is a pip worth we talked about it earlier we talked about the spreads we talked about the Commission's we talked about the quotes we talked about buying and selling a little bit let's say Nate that you made 10 pips is that a lot of money is it not a lot of money how much money is it if you make 10 pips well it all depends there are in the world of currency trading 3 different primary trade sizes and this applies to 99% of all of you that are going to be doing trading the first trade size is the smallest and it's called a micro lot this is what we use when we first start trading and it's the smallest trade size possible now inside of your trading account you might see when you open up an order window the word volume this refers to your trade size okay so it might say volume but it refers to trade size and there's a bunch of numbers with decimals and I want to break those down as I mentioned starting with if I can anyway starting with the micro lot so this is referred to as a micro lot I don't know why they use the word lot but it's a lot size or it's just trade size lot size micro a lot whatever a micro lot represents 1000 units of currency so 1000 units of currency and it is generally shown in your trading account as 0.
01 as the volume or as the trade size so I'm going to use the word volume here because most of you are going to use Metatrader and that's the word you're going to see so that would be the volume this is worth 10 cents or ten pennies or what's the fraction in in pounds fraction of a pound is pence ten pence or whatever currency that you're dealing with in your country the trade size is a micro lot it's the smallest one you can probably trade it's a thousand units of currency it's a trade size of 0.
01 or a volume size of 0.
01 Lots and for every pip moved it's ten cents so going back to our original question if you made 10 pips trading one micro lot name if you made 10 pips what would that be worth and if you're playing along at home let me know if you made 10 pips what would that be worth and you can shout it at your computer screen a dollar so 10 pips great job name 10 pips equals $1 or if you're trading in the UK one pound or if you're trading in a euro denominated account one euro or if you're trading in a yen account it would be 100 yen if you're trading in Australia with Australian dollars it would be one Australian dollar because you made 10 pips each one was worth 10 cents now these numbers are these numbers are approximate for most currencies this is exactly what it will look like if you're trading the Japanese yen it might be 7 cents per pip or 8 cents per pip if you're trading the British Pound Australian dollar it might be 13 cents a pip or some other number close to this number that makes sense name so it's close to this number that's a general range the next trade size that you can trade is a mini and it's 10 times larger than a micro what's 10 times larger than a micro Nate so point one is the volume excellent that's the volume and you would be trading in this case 10, 000 units of currency instead of 1, 000 so if every micro lot was worth 10 cents what's every mini lot worth approximately one dollar one Australian dollar 1 pound 1 euro 100 yen and so forth on down the line depending on where your account was initiated one dollar per pip now this is a general number if it's if you're trading the US dollar Japanese yen in the United States it might be worth 79 cents might be worth 80 cents if you're trading the British Pound Australian dollar it might be worth a dollar 20 or something along those lines it's it's gonna change but it's gonna be in this range so if you make 10 pips on a mini lot Nate how much money have you made 10 pips on a mini lot would be it would be $10 because 1 pip is worth $1 and 10 of them would be worth $10 now what if you made 10 pips but you traded two mini Lots $20 how many units of currency would have mini lot be worth 20, 000 units of currency what would the volume number look like point to and what would the dollar value per pip be 2 dollars if you traded what have you traded 5 mini lots play along with me at home what's your value per pip on 5 mini lots $5.
00 there you go the mini lot is one of the most commonly traded units when I started trading in the year 2000 you couldn't trade a micro or a mini you had to trade what is called a standard standard lot was the original largest trade size well it was the original trade size everything was quoted in standard if a standard lot is ten times larger than a mini lot ten times larger than a mini lot what's a standard lot in units of currency 100, 000 units of currency okay so you're controlling the euro dollar for example if you trade one standard lot you're controlling a hundred thousand dollars worth of euro US dollar it sounds crazy it sounds big it's not really that big stand a lot is a hundred thousand units of currency and how would you quote that with volume it would be a 1 a 1.
0 volume or trade size 1 lot that was what they used to call it they didn't have to call it a standard lot because it was just the only one available and what's the value per pip ten dollars per pip so if you made 10 pips with a standard lot how much money have you made you've made $100 now we're going to talk later on about how much money you need in your trading account to trade these sizes but now you have a good idea of what each of these is worth so we're gonna do a little quiz here and you can play along at home using the stuff that you learned inside of this lesson if ma if you made seven pips with no if you made 10 pips with seven mini Lots how much money have you made you know you've made seven dollars I got to write slower here or else the board really dislikes me if you have made 10 pips on 5 micro Lots how much money have you made 50 cents or 50 pence or whatever this is great if you have made 10 pips with 20 standard Lots how much money have you made – so you've made twenty times ten which would be 20 standard Lots 10 pips $200 okay so now you know about trade sizes and pip values remember these numbers are approximate if you're trading the euro US dollar these are exactly correct and if you're trading the pound Japanese yen these numbers slightly change but stay in a range that is very similar the best way to experiment with this is to open up your demonstration trading account and to play around with taking orders and taking trades and whatever else then we're going to talk about that a little bit later on but the best way to find out what each thing is worth is to open up your your trading platform and start playing around with this and start taking a few trades to wrap things up I want to thank our sponsor Forest Park FX interested in FX trading contact Forest Park FX to open an account and receive cashback rebates on every trade you place you can go to forest park FX com forex trading carries a substantial risk of loss and is not suitable for everyone terms and conditions will apply we'll see you on the next lesson.
