This is not investment advice. The information provided is for educational and informational purposes only and does not constitute a recommendation to buy or sell any financial product.
Pip value is the dollar change per pip move in a position. In FX, the calculation is well-defined. In stocks and indices, the equivalent concept is point value or dollar value per share. Leverage amplifies both: the pip/point value is the same, but the position size relative to the account is different.
This article is a practical view on pip value, point value, and how leverage interacts with them.
Pip value in FX
A pip is the smallest price move in a currency pair. For most pairs, a pip is 0.0001 (the fourth decimal place). For JPY pairs, a pip is 0.01 (the second decimal place).
The pip value is the dollar change per pip move, based on the position size:
- Standard lot (100,000 base units): $10 per pip for most pairs, $6.67 for JPY pairs (approximate)
- Mini lot (10,000 base units): $1 per pip for most pairs
- Micro lot (1,000 base units): $0.10 per pip for most pairs
The formula: pip value = (pip in decimal form) × position size in base units.
For EUR/USD, a pip is 0.0001. A standard lot is 100,000 EUR. The pip value in USD is 0.0001 × 100,000 = $10. The trade is profitable if EUR/USD moves up by 10 pips, and the profit is $100.
Point value in stocks
Stocks don't trade in pips; they trade in dollars and cents. The equivalent concept is point value or dollar value per share.
For a stock at $50, a 1-point move is a $1 move per share. For a 100-share position, a 1-point move is a $100 change in the position value.
The point value is the dollar change per 1-point move, based on the position size:
- 100 shares of a $50 stock: $1 per point × 100 = $100 per point
- 500 shares of a $50 stock: $1 per point × 500 = $500 per point
The position value is shares × price. For 100 shares of a $50 stock, the position value is $5,000. A 1% move is $50. The dollar change per percentage point of move is shares × price × 0.01.
Point value in indices
Index futures and CFDs have a multiplier that defines the point value. For the S&P 500 E-mini future, the multiplier is $50 per point. A 1-point move in the S&P 500 is a $50 change per contract.
For the S&P 500 CFD with a $1 per point multiplier, a 1-point move is a $1 change per contract.
The point value is defined by the contract. Read the contract specifications before trading.
How leverage changes the impact
The leverage doesn't change the pip/point value. A 100-share position in a $50 stock has a $100 per point value, regardless of whether you used cash or margin.
The leverage changes the position size relative to your account. A trader with a $5,000 account who buys $10,000 of stock (using 2× margin) is running a 2× leveraged position. A 1% move in the stock is $100, which is 2% of the account. The same trade in cash would be a 1% move on the account.
The risk in dollar terms is the same; the percentage impact on the account is different.
Position sizing with pip/point value
The right way to size a position is to decide the percentage of the account you're willing to lose, then calculate the position size that produces that loss at the stop-loss level.
Example: a $50,000 account, 1% risk per trade ($500). The trader wants to buy a $50 stock with a $1 stop-loss (2% of the price). The risk per share is $1. The position size is $500 / $1 = 500 shares. The position value is 500 × $50 = $25,000 (50% of the account).
If the trader uses 2× margin, the position can be $50,000 (the full account) on $25,000 of margin. The risk in dollars is the same ($500 if the stock drops $1). The percentage risk on the account is 1%.
The pip/point value is the same in both cases. The position size and the leverage are different.
How to calculate quickly
Three practical shortcuts:
FX
For a standard lot of a non-JPY pair, the pip value is approximately $10. For a mini lot, $1. For a micro lot, $0.10. The exact value depends on the current exchange rate of the pair's quote currency to your account currency.
Stocks
The point value is $1 per share. The dollar change for a 1% move is shares × price × 0.01. For 100 shares of a $50 stock, a 1% move is $50.
Index futures
The point value is the contract multiplier. For the S&P 500 E-mini, $50 per point. For the Euro Stoxx 50, €10 per point. For the FTSE 100, £10 per point. The dollar change for a 1% move is contracts × multiplier × price × 0.01.
How to evaluate
When sizing a position, ask:
- What's the pip/point value of the product? (Standardized for FX, simple for stocks, contract-defined for futures.)
- What's the position size relative to the account? (The leverage is determined by this.)
- What's the stop-loss distance in pips/points? (Determines the dollar risk per trade.)
- What's the percentage of the account at risk? (Should be 1-2% per trade for most strategies.)
The answers to these questions are what determine the right position size. The right size is mechanical: it's what produces the desired percentage risk at the stop-loss level.
FAQ
Why is pip value important?
Pip value lets you calculate the dollar impact of a price move before placing the trade. The calculation is the foundation of position sizing and risk management.
Does leverage change pip value?
No. Leverage changes the position size relative to your account. The pip value is the same for a given position size. A 100-share position in a $50 stock has a $100 per point value, regardless of whether you used cash or margin.
How do I calculate pip value for a non-USD account?
Convert the pip value to your account currency using the current exchange rate. For EUR/USD with a $10 pip value per standard lot, the pip value in EUR is $10 / EUR/USD = €9.20 (approximate).
What's the difference between a pip and a point?
A pip is the smallest price move in a currency pair (0.0001 for most pairs). A point is the smallest price move in a stock or index (1 cent for stocks, 1 unit for indices). The two are used in different markets but the concept is similar.
Related resources
Where to start
If you want to use pip value and point value for position sizing, the practical first step is to calculate the dollar risk per trade for your typical setup. See our broker table for the current list of platforms with position-sizing calculators.