Lot, Margin, Leverage, and Stop Out — Everything You Need to Know Before Opening an Order

What is a Lot?

A Lot is a unit of the contract size of a trade – this number tells you how much currency you are buying/selling.

• Standard Lot (1.00) = 100,000 units → 1 pip ≈ $10 (for pairs where USD is the quote currency)
• Mini Lot (0.10) = 10,000 units → 1 pip ≈ $1
• Micro Lot (0.01) = 1,000 units → 1 pip ≈ $0.10
• Nano Lot (0.001) = 100 units (available with some brokers like Exness Cent)

Beginners with small capital should always start with a Micro Lot to keep the loss per pip small.

How is Pip Value Calculated?

Formula: Pip Value = Pip Size × Contract Size × Lots (Result is in the quote currency)

Example EUR/USD 1 lot: 0.0001 × 100,000 × 1 = $10 per pip

For pairs where the quote is not USD (e.g., USD/JPY), you need to convert it to USD – our calculator handles this for you.

Leverage and Margin

Leverage is the ratio at which a broker "lends" you to control a large sum with a small capital. For example, 1:500 means $1 of your capital controls a position worth $500.

Margin is the collateral locked by the broker when you open an order – calculated by: Margin = (Contract Size × Lots) / Leverage × Base/USD Price

Margin Level, Margin Call, and Stop Out

These three figures are very important – do not confuse them:

• Equity = Balance + Floating Profit/Loss
• Margin Level (%) = Equity / Used Margin × 100
• Margin Call = Broker's alert when Margin Level falls below a certain level (often at 100%)
• Stop Out = Broker automatically closes orders when Margin Level falls below the Stop Out level

Standard Stop Out values for popular brokers:

• Exness, XM: 20%
• Pepperstone, IC Markets: 50%
• FBS: 20–40%

Real Calculation Example

Assume an account with $1,000, leverage 1:500, opening a Buy position of EUR/USD 0.5 lot at 1.0850:

• Margin used = (100,000 × 0.5) / 500 × 1.08 ≈ $108
• Pip Value = 0.0001 × 100,000 × 0.5 = $5 per pip
• Initial Free Margin = 1,000 − 108 = $892
• Margin Call (100%) occurs when Equity = $108 → Loss of $892 = 178 pips
• Stop Out (20%) occurs when Equity = $21.6 → Loss of $978 ≈ 196 pips

Price moves against 178 pips from 1.0850 = closes at ≈ 1.0672

Try the Lot Calculator

Open our [Forex Lot Calculator](/tools/lot-calculator) to calculate Position Size, Margin, Pip Value, and Stop Out all in one place – free, no registration required.