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Pip value on crosses

Working out what a pip is worth when neither currency in the pair is your account currency, which requires a second conversion rate.

On a cross such as EUR/GBP held in a dollar account, the pip is first worth pounds, and pounds must then be converted to dollars. The chain is: pip size x units = value in quote-currency, then multiply by the quote currency's rate against your account-currency.

Getting this wrong is a common sizing error, because traders assume every pair is worth $10 per pip on a standard-lot. On sterling-quoted crosses it is higher; on yen-quoted crosses it moves with USD/JPY all day.

Example: 1 standard lot of EUR/GBP, GBP/USD at 1.2700. Pip value = 0.0001 x 100,000 = GBP 10, and GBP 10 x 1.2700 = USD 12.70 per pip. A 40-pip stop risks $508, not $400.

Related: pip-value, cross-rate

See it drawn

Original diagrams for the ideas on this page. Illustrative, not real market data.

How a position size is worked outAccount size, risk per trade and stop distance feed into one box giving the number of shares.ACCOUNT SIZE$25,000your capitalRISK PER TRADE1%of the accountSTOP DISTANCE$0.50entry to stopPOSITION SIZE500 sharesrisk budget: $25,000 × 1% = $250position size: $250 ÷ $0.50 = 500 shares
Working out a position size. Three numbers decide how big a trade is: the account, the share of it put at risk, and the distance from entry to stop. One percent of $25,000 is a $250 budget, and a $0.50 stop divides into that 500 times.

Educational only, not advice. Spotted an error? Post in Site Feedback.