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A pip is the smallest standard price move a currency pair can make — usually the fourth decimal place (0.0001) for most pairs. If EUR/USD moves from 1.1050 to 1.1051, that's a one-pip move.
A lot is the size of your trade. A standard lot is 100,000 units of the base currency, a mini lot is 10,000, and a micro lot is 1,000. Beginners often start with micro lots to keep risk small while learning.
Leverage lets you control a larger position than your account balance alone would allow — for example, 1:100 leverage means $1,000 of your own money can control a $100,000 position. Leverage magnifies both gains and losses, so it should be used carefully and always alongside a clear risk management plan.
Real-World Example
A trader with a $1,000 account opens a 0.1 lot (mini lot) position on EUR/USD using 1:100 leverage. That position controls $10,000 of currency exposure while only around $100 of the trader's account is locked up as margin — leverage is what makes that gap between exposure and required capital possible. If EUR/USD then moves 20 pips in their favor, at roughly $1 per pip on a 0.1 lot, that's a $20 gain — a 2% return on the $1,000 account from a price move of only 0.2%, which is exactly why leverage cuts both ways: the same 20-pip move against them would be a $20 loss just as fast.
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