What are Pips and Lots?

IG TV's presenter Sara Walker explains what Pips and Lots are when trading forex. Pip value is the value attributed to a one-pip move in a forex trade. The definition of a pip can vary between currencies, but it is usually equal to the fourth figure after the decimal point in a currency listing. A lot is a standardised group of assets that is traded instead of a single asset. Often, the actual value of an asset or security means that trading a single unit of it isn’t viable. In these cases, traders will use a lot: a set amount of a particular asset that is the amount you buy or sell with each transaction. It means that investors have a standardised contract and always known how much of an asset they are trading when they open a position. A lot can refer to any asset class or financial instrument. In options trading they are often standardised across the board: an equity option, for instance, is priced so that each lot is equal to 100 shares of the underlying asset. Find out more in IG's glossary: http://www.ig.com/uk/glossary-trading-terms/pip-value-definition

Comments