A pip is the standard unit of price movement in a currency pair. A lot describes position size. In the simulator you practise these with virtual funds so the numbers are safe to experiment with, and getting comfortable with both is what turns a chart full of numbers into something you can actually reason about.
Measuring movement with pips
For most pairs, a pip is the fourth decimal place in the quoted price. If EUR/USD moves from 1.0950 to 1.0955, that is a five-pip move. Pairs that include the Japanese yen are the exception — because yen prices are quoted with fewer decimal places, a pip there is the second decimal place instead. So USD/JPY moving from 148.20 to 148.30 is also a ten-pip move, even though the numbers look different from a EUR/USD example.
Pips give you a consistent way to describe "how far" a pair has moved, regardless of the pair's starting price. Once you can glance at a chart and estimate the pip move at a glance, reading price action becomes much faster.
Sizing a position with lots
A lot is a standardised unit of position size:
- A standard lot represents 100,000 units of the base currency.
- A mini lot represents 10,000 units — one-tenth of a standard lot.
- A micro lot represents 1,000 units — one-hundredth of a standard lot.
In practice, most beginners start with mini or micro lots because smaller sizes make it easier to see how a given pip move affects a simulated position, without the numbers becoming distracting.
Why size matters
The size of a position determines how much a given pip move is worth in the simulator. A one-pip move on a micro lot is a small change; the same one-pip move on a standard lot is a much larger one. Understanding that relationship — before you ever place a real order elsewhere — is exactly why practising with a virtual balance is useful: you can experiment with different lot sizes and see the effect immediately, without real money involved.
Practise this
Open the simulator and place two small practice orders on the same pair at the same time, using a micro lot for one and a mini lot for the other. Watch how the same pip move affects each position differently — that side-by-side comparison makes the relationship between pips and lots click much faster than reading about it alone.