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What are spread, pip, and lot?

Spread, pip and lot explained, with a simple EUR/USD example.

These three terms describe how prices and trade sizes work:

  • Spread — the difference between the Ask (buy) price and the Bid (sell) price. It's one of your core trading costs.

  • Pip — the standard unit of price movement. For most currency pairs it's the 4th decimal place (0.0001); for JPY pairs it's the 2nd decimal place (0.01). A 5th decimal is called a "pipette" (one tenth of a pip).

  • Lot — the unit of trade volume. In Forex, 1 standard lot = 100,000 units of the base currency (0.1 = mini lot = 10,000 units; 0.01 = micro lot = 1,000 units). For metals, indices, energies and crypto the contract size is different — check the Contract Specification.

Example: if EUR/USD is quoted Bid 1.1040 / Ask 1.1042, the spread is 0.0002 — that's 2 pips.

See these terms in context in Trading basics.

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