Pip value is what one pip is worth in money for your lot size and pair. Here's the formula, a worked £ example, and how it drives position sizing.

What is Pip Value?

A pip is the standard unit a currency pair moves in. Pip value is what that movement is worth in money — for the lot size you are trading, on the pair you are trading, in your account currency. It is the number that turns "the trade went 20 pips against me" into "£40 gone". Without it, stop-losses and position sizes are just abstract figures on a screen.

What decides pip value

Three things set the money value of a pip:

Lot size — a bigger position moves more money per pip. Pip value scales directly with lots.
The pair — specifically the quote currency, the second one named. For pairs quoted in your account currency the value is fixed; for others it must be converted.
Your account currency — the figure has to end up in the currency your account is held in, here pounds.

The formula

For a standard lot (100,000 units), one pip is a 0.0001 move for most pairs:

Pip value = (0.0001 × contract size) ÷ exchange rate to your account currency

For 1 standard lot of GBP/USD, one pip = 0.0001 × 100,000 = $10. To reach pounds, divide by the GBP/USD rate. At 1.2500: $10 ÷ 1.2500 = £8.

Yen pairs use 0.01 as a pip, not 0.0001, because they are quoted to two decimal places — the one common exception to keep in mind.

A worked example

You trade 0.50 lots of GBP/USD. A standard lot is worth roughly £8 per pip at 1.2500, so half a lot is £4 per pip.

Your stop-loss is 30 pips away:

30 pips × £4 = £120 at risk.

Change nothing but the size. At 0.20 lots, pip value is £1.60, and the same 30-pip stop risks 30 × £1.60 = £48. Same pair, same stop distance, less than half the money on the line. Pip value is the lever between the chart and your account.

Why it matters for position sizing

Position sizing works backwards from pip value. You decide the pounds you are willing to lose, measure your stop in pips, and solve for the lot size:

Lots = risk in £ ÷ (stop in pips × pip value per lot)

Risk £100 on a 40-pip stop with an £8-per-lot pip value: 100 ÷ (40 × 8) = 0.31 lots. That is disciplined sizing — the trade is built around a fixed loss, not a hopeful guess. Get pip value wrong and every risk figure downstream is wrong with it.

Where it catches people out

Pip value is fixed and easy on pairs quoted in your account currency, but most pairs are not, and the conversion rate moves. On a pound account trading USD/JPY, both the 0.01 pip and a yen-to-pound conversion apply, so the per-pip figure drifts as prices move. It is rarely a large gap, but assuming a flat "£8 a pip" across every pair is how a stop that felt like £100 of risk quietly becomes £130.

Pip value connects pips to pounds. Until you know it, a 50-pip stop-loss tells you nothing about how much you stand to lose — and risk you cannot measure is risk you cannot control.

The Karnek note

Karnek reads your live positions and their money value straight from the terminal, so profit, loss and risk show up in your account currency rather than abstract pips. It is read-only through the investor password and can never open, size or close a trade for you.

See it in Karnek: see how Karnek works.