Asset classes · Forex
Currency pairs and pips: quotes, lots, pip value and leverage
How to read a currency quote, what a pip and a lot are, how to calculate pip value in dollars for any pair, and what US retail forex leverage limits mean in practice.
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A currency is always priced in another currency, so forex trades in pairs. A quote such as EUR/USD 1.1199 tells you how many US dollars one euro costs, and every move in that number is a gain for one currency and a loss for the other. Before anyone can size a currency trade or judge its risk, they need three pieces of vocabulary: the pair, the pip and the lot.
These units look like jargon, but they are simple arithmetic. A pip is the standard small step in a quote, a lot is the standard trade size, and multiplying the two gives the dollar value of each step. What makes forex dangerous is not the arithmetic; it is that US retail accounts may control up to 50 times their deposit, so a few cents on a currency can be a large share of the money at stake.
This guide shows how to read a quote, defines pips and lots, works through pip values in dollars for three kinds of pair using the Federal Reserve's rates of October 23, 2026, and explains the CFTC's leverage limits for US retail traders with a worked example of a losing trade.
Reading a currency pair
Every pair has two currencies:
- The base currency comes first. It is the thing being priced, always one unit.
- The quote currency comes second. The rate is how much of it one unit of the base costs.
On October 23, 2026, the Federal Reserve's daily noon rates were EUR/USD 1.1199 and USD/JPY 156.87. So €1 cost $1.1199, and $1 cost ¥156.87. Buying a pair means buying the base currency and selling the quote currency; selling the pair means the opposite. If you buy EUR/USD and it rises to 1.1249, the euro has gained against the dollar and you have profited.
Bid, ask and spread
A dealer quotes two prices. The bid is what it pays for the base currency; the ask (or offer) is what it charges. In an illustrative quote of 1.1198 / 1.1200, you can sell euros at 1.1198 or buy them at 1.1200. The two-pip difference is the spread, a cost paid on every round trip. See Bid-ask spread.
Direct quotes, indirect quotes and crosses
Market convention fixes which currency comes first. The euro, the pound, the Australian dollar and the New Zealand dollar are usually quoted as the base against the US dollar (EUR/USD, GBP/USD); most others are quoted with the dollar as the base (USD/JPY, USD/CAD, USD/CHF). A pair without the dollar, such as EUR/GBP, is a cross. Reversing a quote is easy: USD/EUR is 1 ÷ 1.1199 = 0.8929 euros per dollar.
Pips and pipettes
A pip is the standard unit of change in a quote:
- For most pairs, a pip is the fourth decimal place: 0.0001. EUR/USD moving from 1.1199 to 1.1200 is one pip.
- For pairs quoted in Japanese yen, a pip is the second decimal place: 0.01. USD/JPY moving from 156.87 to 156.88 is one pip.
Many platforms quote one more digit, a pipette or fractional pip: one-tenth of a pip. EUR/USD 1.11993 has a pipette of 3. See also Pip.
Lots
Retail forex trades are sized in lots of the base currency (Lot):
| Lot | Units of base currency | Pip value when USD is the quote currency |
|---|---|---|
| Standard | 100,000 | $10.00 |
| Mini | 10,000 | $1.00 |
| Micro | 1,000 | $0.10 |
Most platforms let traders choose any size, such as 0.3 lots (30,000 units), so a lot is a unit of measure rather than a fixed ticket.
Pip value: the arithmetic
The value of one pip, in the quote currency, is the position size times the pip size. To turn that into US dollars, convert it at the current rate.
The pattern is worth remembering: pip values are fixed in the quote currency and only fixed in dollars when the dollar is the quote currency.
Leverage and the US security deposit
Forex accounts are traded on margin: the trader posts a deposit and controls a much larger notional position. In the United States, retail off-exchange forex is regulated by the Commodity Futures Trading Commission (CFTC), and dealers must be registered with it and be members of the National Futures Association (NFA), the industry's registered futures association.
The CFTC's rule, 17 CFR 5.9, sets the floor for the security deposit a dealer must collect from a retail customer:
- At least 2% of notional value when both currencies in the pair are designated major currencies, a maximum leverage of 50:1.
- At least 5% for all other pairs, a maximum of 20:1.
The registered futures association designates which currencies count as major and must review the list and the deposit levels at least once a year; it can require more than the minimums. If an account's deposits fall short, the dealer must collect more or liquidate the customer's positions. These limits apply to US customers; other countries set their own. The Leverage entry defines the term generally.
The deposit is not a limit on losses. A gap at the weekly open or around major news can move the price past the point where a dealer can close the position, so losses can exceed the deposit. Sizing trades so that a normal move costs a small fraction of the account is covered in Position sizing: how many shares to buy for a set risk.
Other costs: spread and overnight financing
- Spread. With an illustrative 1-pip spread, a standard EUR/USD lot costs $10 each round trip before any price move. Frequent trading multiplies it.
- Rollover (financing). A spot position held past the daily cut-off is rolled to the next value date, and the trader earns or pays roughly the interest-rate difference between the two currencies. Buying the higher-yielding currency usually earns a credit; selling it usually costs a debit. Dealers set their own rates around that difference.
Pitfalls
- Reading the pair backwards. "Short USD/JPY" is a bet that the yen strengthens. Check which currency is the base before acting on a view about "the dollar."
- Assuming $10 a pip everywhere. It is $10 per standard lot only when the dollar is the quote currency; yen pairs and crosses differ.
- Ignoring the yen's decimal. A move of 0.50 in USD/JPY is 50 pips, not half a pip.
- Confusing deposit with risk. A 2% deposit is a regulatory minimum, not a stop-loss.
- Forgetting financing. Rollover charges can turn a flat position into a loss over months.
Pips compared with other price units
| Market | Smallest standard step | Value per step |
|---|---|---|
| Spot EUR/USD | 1 pip = 0.0001 | $10 per 100,000-euro lot |
| Spot USD/JPY | 1 pip = 0.01 | ¥1,000 per $100,000 lot |
| CME Euro FX futures | Exchange tick, €125,000 size | Set in the contract specifications |
| US stocks | $0.01 per share | $1 per 100 shares |
| CME WTI crude (CL) | $0.01 per barrel | $10 per 1,000-barrel contract |
How Finabase does it
The /forex page lists 51 currency pairs, from majors such as EUR/USD and USD/JPY to European crosses, yen crosses and emerging-market pairs, with the last rate, the day's change and returns from one week to two years. Each pair has a symbol page with a chart.
Finabase does not execute forex trades and has no pip or position-size calculator; the pip-value table on this page is ours, computed from the Federal Reserve's published rates. Use the app's rates as inputs to the formulas above.
Frequently asked questions
How much is one pip worth?
For a standard lot of 100,000 units, one pip is worth $10 whenever the US dollar is the quote currency, as in EUR/USD or GBP/USD. For USD/JPY it is ¥1,000, about $6.37 at a rate of 156.87. For a mini lot divide by 10, for a micro lot by 100.
Why is a yen pip 0.01 instead of 0.0001?
Because one yen is worth so little that yen pairs are quoted with only two decimal places. A move from 156.87 to 156.88 in USD/JPY is one pip.
What leverage is allowed for US retail forex traders?
Under CFTC rules the minimum security deposit is 2% of notional for pairs of major currencies and 5% for other pairs, which caps leverage at 50:1 and 20:1. Dealers can require more.
Can I lose more than my deposit in forex?
Yes. The deposit is a minimum to open the position, not a cap on losses. If the price gaps past the point where the dealer can close the position, the loss can exceed the money in the account.
Summary
A currency pair prices one unit of the base currency in the quote currency, and a pip is the standard step in that price: 0.0001 for most pairs and 0.01 for yen pairs. Multiply the pip by the number of units to get its value in the quote currency, then convert to dollars: $10 per standard lot when the dollar is the quote currency, about $6.37 for USD/JPY at 156.87, and a moving amount for crosses. US rules require deposits of at least 2% or 5% of notional, so leverage reaches 50:1, and at that leverage a 50-pip move against a standard EUR/USD lot costs 22% of the deposit. Spreads and overnight financing add to the cost. The arithmetic is easy; the risk comes from how much notional a small deposit can control.
Sources and further reading
- Federal Reserve Board (H.10) — US dollars per euro and yen per dollar, daily noon rates (FRED series DEXUSEU, DEXJPUS), downloaded 2026-10-30
- 17 CFR 5.9 — Security deposits for retail forex transactions (Cornell LII)
- Bank for International Settlements — Triennial Central Bank Survey 2025, press release (September 30, 2025)