Module 3: The Trader's Language · Lesson 12/40
8 min 40 XP
EUR/USD = 1.0852 reads: *1 euro costs 1.0852 dollars*. The first currency (EUR) is the base, the thing being priced. The second (USD) is the quote, the currency the price is expressed in. When EUR/USD rises, the euro is strengthening against the dollar; when it falls, the dollar is winning. Every pair is a tug-of-war between two economies.
A pip ('percentage in point') is the standard unit of price movement: the 4th decimal on most pairs (1.0852 → 1.0853 = 1 pip) and the 2nd decimal on JPY pairs (154.20 → 154.21). Brokers usually show one extra digit, the pipette, a tenth of a pip, which is why you may see 1.08527. Saying 'EUR/USD moved 30 pips' is universal trader language; nobody says 'it moved 0.0030 dollars'.
Forex is traded in lots of the base currency. A standard lot = 100,000 units. A mini = 10,000. A micro = 1,000. Why does size matter so much? Because size converts pips into money: on EUR/USD, one pip is worth $10 per standard lot, $1 per mini, $0.10 per micro. The same 30-pip move is $300 or $3 depending on the size you chose. *Position size, not the chart, decides how much you risk.*
Pip value (USD-quoted pairs)
Pip value = Lots × 100,000 × 0.0001
EUR/USD with 0.50 lots: 0.50 × 100,000 × 0.0001 = $5 per pip. A 25-pip stop on that trade risks 25 × $5 = $125. You will drill this in the Position Lab next.