A forex lot is the minimum amount that a trader’s position must reach before the broker will pass the order to the market maker. For a standard account, this is $100000, and for a mini-account most favored by beginners, the lot size is $10000. Combined with lower minimum leverage, the lower lot size enables traders to begin their trading careers with smaller initial deposits, and that is why the mini account is so popular among brokers and traders.
A pip is the tick that traders are familiar with from the stock market. It is the smallest amount by which a currency quote can move. For instance, when the price of the EURUSD moves from 1.4001 to 1.4000, traders would say that the price fell by one “pip”.
It is a good idea to measure performance in a trading account in pips rather than money gained or lost. A $500 gain on $1000 with high leverage might sound bigger than a $5 gain on a $100 account, but if it is the same amount in terms of pips, both traders have the same success in their actions.
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