Pips, lots, and leverage explained

The smallest standard price move quoted for a currency pair — typically the fourth decimal place (0.0001) for most pairs, or the second decimal place (0.01) for pairs involving the Japanese yen. If EUR/USD moves from 1.1050 to 1.1051, that's one pip.

A unit of trade size. One standard lot is 100,000 units of the base currency. A mini lot is 10,000 units (0.1 lots), and a micro lot is 1,000 units (0.01 lots). Lot size directly determines how much each pip of movement is worth in your account currency — larger lots mean larger $ swings per pip.

Leverage lets you control a position larger than your account balance by borrowing the difference from your broker. 100:1 leverage means $1,000 of your own capital can control a $100,000 position. Leverage amplifies both gains and losses proportionally — it doesn't change a strategy's edge, only the size of every outcome it produces.

Position size (lots), stop-loss distance (pips), and account risk % are the three numbers behind every proper risk calculation — get any one of them wrong and the actual dollar risk on a trade won't match what you intended.