A trader risks a clean 20 pip stop on EURUSD and a clean 20 pip stop on USDJPY the same week, using the same lot size both times, convinced the risk is identical because the pip count matched. It was not. One trade risked roughly double the other, purely because a pip means a different amount of money depending on the pair, and nobody did the arithmetic before clicking buy. This single piece of math is the most basic tool in a forex trader's kit, and skipping it is how identical-looking trades produce wildly different account damage.
What a pip actually is, pair by pair
For most pairs quoted to four decimal places, EURUSD, GBPUSD, AUDUSD, USDCAD among them, a pip is the fourth decimal, 0.0001. For yen pairs, USDJPY and EURJPY, quoted to only two decimals, a pip is 0.01. That single difference in decimal convention is exactly why a 20 pip stop on EURUSD and a 20 pip stop on USDJPY are not comparable numbers without converting both into actual dollars first.
Many platforms now quote a fifth decimal on non-yen pairs and a third on yen pairs, showing fractional pips, sometimes called pipettes, purely for pricing precision. A EURUSD quote of 1.08503 is showing half a pip of extra detail beyond the whole pip at 1.0850. This matters for reading the spread accurately, a broker advertising a 0.7 pip spread on EURUSD is really quoting something like 1.08497 to 1.08504, but it rarely changes the sizing arithmetic, which is almost always done in whole pips for simplicity.
Pip value depends on the pair and the account currency
For a standard lot, 100,000 units, on a pair where the US dollar is the second currency listed, EURUSD or GBPUSD, one pip is worth $10 flat, because 0.0001 times 100,000 equals $10. On USDJPY, where the dollar is listed first, pip value depends on the current exchange rate: at roughly 155.00, one pip on a standard lot works out to about $6.45. On a cross like EURGBP, where neither currency is the US dollar, pip value has to be converted through the current EURGBP rate into dollar terms, which is why cross pairs are the ones traders most often size incorrectly by assuming a flat $10 that does not actually apply.
A cheat table worth memorizing
For a standard lot near typical 2020s levels: EURUSD and GBPUSD run close to $10 per pip. USDJPY near 155.00 runs close to $6.45 per pip. AUDUSD and NZDUSD, quoted with the dollar second, also run close to $10 per pip. USDCAD, dollar first, runs close to $7.30 per pip near 1.3650. For mini lots, 10,000 units, divide every figure by ten; for micro lots, 1,000 units, divide by one hundred. Keeping this short table next to your platform removes the guesswork at the exact moment guesswork is most expensive.
EURGBP illustrates the cross-pair conversion clearly. Neither currency in the pair is the US dollar, so pip value has to route through GBPUSD to land in dollar terms. At a EURGBP rate near 0.8550 and GBPUSD near 1.2650, one pip on a standard lot works out to roughly $10 times 1.2650, or about $12.65. Skip that conversion and assume the flat $10 figure that applies to EURUSD, and a trader sizing a EURGBP trade is quietly under-risking or over-risking every single position by more than 20 percent without realizing why their actual losses never quite match the plan.
Turning pip value into position size
Once pip value is known, sizing is one line of arithmetic: risk budget divided by stop distance in pips divided by pip value per lot. On a $10,000 account risking 1 percent, $100, with a 25 pip stop on EURUSD at $10 per pip, that is $100 divided by (25 times $10), or 0.40 lots. The identical $100 risk with a 25 pip stop on USDJPY at $6.45 per pip works out to $100 divided by (25 times $6.45), or roughly 0.62 lots, a meaningfully larger position for the same dollar risk and the same pip stop, precisely because the pip is worth less on that pair.