Stage 3: Execution and Risk · Module 8: Risk Management and Position Sizing · Lesson 4 of 9 · Back to course
Position sizing only works if you know what one move is worth in pounds for the thing you’re trading. With spread bets that’s usually easy. With CFDs it depends on the contract size and, often, an exchange rate. This lesson gives you a simple method for forex, indices and gold.
What you’ll learn
- The difference between a pip, a point and a tick
- Why spread bets make the maths simple
- How to work out forex pip values in pounds for any pair
- Point values for index CFDs, including ones priced in dollars or euros
- How gold is usually quoted, and a common trap
Pips, points and ticks
- A pip is the standard unit of movement in forex: the fourth decimal place for most pairs (0.0001), and the second for yen pairs (0.01).
- A point usually means one unit of the price on an index – the FTSE 100 moving from 8,250 to 8,251 is one point. Spread betting providers also use “point” for whatever unit they price a market in, which for forex is normally one pip.
- A tick is the smallest price step a market can move. You’ll mostly see this on futures.
Words are used loosely across platforms, so always check what “1 point” means on the market you’re trading.
Spread bets: you choose the value
With a spread bet, you pick a stake per point in pounds. £2 a point means each point is worth £2, whatever the market and whatever currency it’s priced in. The provider handles any conversion.
That’s why spread bets are easier to size: stake = risk in £ ÷ stop in points (see Lesson 8.3). The main thing to check is how the provider defines a point on each market – especially gold, oil and some share prices.
Forex CFDs: the three-step method
CFDs on forex are sized in lots:
| Lot size | Units of base currency |
|---|---|
| Standard lot (1.00) | 100,000 |
| Mini lot (0.10) | 10,000 |
| Micro lot (0.01) | 1,000 |
Step 1 – pip value in the quote currency: units × pip size. For a standard lot, that’s 100,000 × 0.0001 = 10 units of the quote currency (or 100,000 × 0.01 = 1,000 for yen pairs).
Step 2 – convert to pounds if the quote currency isn’t GBP.
Step 3 – multiply by your lot size.
Illustrative rates: GBP/USD 1.2650, GBP/JPY 189.80, EUR/GBP 0.8650.
| Pair | Quote currency | Pip value per standard lot | In £ |
|---|---|---|---|
| EUR/GBP | GBP | £10 | £10.00 |
| GBP/USD | USD | $10 | $10 ÷ 1.2650 ≈ £7.91 |
| EUR/USD | USD | $10 | ≈ £7.91 (same USD conversion) |
| USD/JPY | JPY | ¥1,000 | ¥1,000 ÷ 189.80 ≈ £5.27 |
For any quote currency, the rule is: divide by the GBP rate for that currency (how many units of it £1 buys).
Worked example: USD/JPY
Figures are made up for teaching purposes.
You’re trading 0.30 lots of USD/JPY with a 30-pip stop.
- Pip value per lot ≈ £5.27, so per 0.30 lots ≈ £1.58.
- 30 pips × £1.58 ≈ £47 at risk.
If you’d assumed £10 a pip (as for EUR/GBP), you’d have thought the risk was £90 and sized much smaller than needed. The mistake can go the other way too, which is worse.
Pip values change with exchange rates
Because the conversion uses a live rate, a pip’s value in pounds drifts. If GBP/USD rose from 1.2650 to 1.3000, a GBP/USD pip on one lot would fall from about £7.91 to about £7.69. For everyday sizing the difference is small, but recalculate rather than relying on a number you wrote down months ago.
Index CFDs: check the contract size
On an index, one point is one unit of the index. What that is worth depends on the CFD contract, and providers differ:
- Some UK 100 CFDs are £1 per point per contract; others are £10, or allow fractions.
- An index priced in dollars (such as a US 500 CFD at $1 per point per contract) needs converting: $1 ÷ 1.2650 ≈ £0.79 per point.
- An index priced in euros (such as a Germany 40 CFD at €1 per point): €1 × 0.8650 ≈ £0.87 per point (using the EUR/GBP rate, which tells you how many pounds €1 buys).
The contract specification on your platform will show the value per point. Find it before your first trade on any new market.
Gold: a common trap
Gold (XAU/USD) is priced in dollars per troy ounce. On many CFD platforms one lot is 100 ounces, but not all.
The simplest way to think about it is in dollars of price movement:
- A $1 move in gold on 1 lot of 100 oz = $100 ≈ £79.05 at GBP/USD 1.2650.
- On 0.10 lots (10 oz), a $1 move ≈ £7.91.
Worked example (illustrative): 0.10 lots, stop $15 below entry. Risk ≈ 15 × £7.91 ≈ £118.60.
The trap is the word “pip”. Some platforms call $0.01 a pip on gold, others $0.10, and spread betting providers define a “point” in different ways. A stop of “150 pips” could mean a $1.50 move or a $15 move. Always size gold from the dollar distance and the ounces per lot, not from a pip count you can’t verify.
Futures: tick values are fixed
With futures you don’t choose a value per point – the exchange sets it. Each contract has a fixed tick size and tick value:
| Contract | Code | Contract size | Tick size | Value of 1 tick | Value of a 1-point (or $1) move |
|---|---|---|---|---|---|
| E-mini S&P 500 | ES | $50 × S&P 500 index | 0.25 index points | $12.50 | $50 per point |
| Micro E-mini S&P 500 | MES | $5 × S&P 500 index | 0.25 index points | $1.25 | $5 per point |
| E-mini Nasdaq-100 | NQ | $20 × Nasdaq-100 index | 0.25 index points | $5.00 | $20 per point |
| Micro E-mini Nasdaq-100 | MNQ | $2 × Nasdaq-100 index | 0.25 index points | $0.50 | $2 per point |
| WTI Crude Oil | CL | 1,000 barrels | $0.01 per barrel | $10.00 | $1,000 per $1 move |
| Micro WTI Crude Oil | MCL | 100 barrels | $0.01 per barrel | $1.00 | $100 per $1 move |
| Gold | GC | 100 troy ounces | $0.10 per ounce | $10.00 | $100 per $1 move |
| Micro Gold | MGC | 10 troy ounces | $0.10 per ounce | $1.00 | $10 per $1 move |
Source: CME Group contract specifications and rulebook, checked 18 October 2026. Exchanges can change specifications, so always check the CME page or your platform before you trade.
Hypothetical example: MES moves 12 points in your favour on 2 contracts. 12 points = 48 ticks × $1.25 × 2 = $120, or about £92 at £1 = $1.30. See 1F.2 Contract specs and tick values.
A quick reference card
| Market | What to look up | Formula for £ value per move |
|---|---|---|
| Any spread bet | How the provider defines 1 point | Your stake per point |
| Forex CFD (GBP quote) | Lot size | 100,000 × pip × lots |
| Forex CFD (other quote) | Lot size + GBP rate | (100,000 × pip × lots) ÷ GBP rate |
| Index CFD | Value per point per contract, and its currency | Value × contracts, converted to £ |
| Gold CFD | Ounces per lot | $ move × ounces, converted to £ |
Key takeaways
- Spread bets are simple: your stake per point is the value of each point.
- For forex CFDs, a standard lot is worth 10 units of the quote currency per pip (1,000 for yen pairs), converted into pounds.
- Pip values drift with exchange rates. Recalculate regularly.
- Index CFD contract sizes vary between providers. Always check.
- Size gold from the dollar move and the ounces per lot, not from a vague “pip”.
Quick check
- What’s a pip worth on 0.50 lots of EUR/GBP?
- GBP/USD is 1.2500. Roughly what’s a GBP/USD pip worth on 1 lot?
- A US index CFD is $1 per point per contract. With GBP/USD at 1.2650, what’s 2 contracts worth per point?
Answers: 1) £5. 2) $10 ÷ 1.25 = £8. 3) About £1.58.
FAQs
Why does my platform show a different pip value from this lesson? Different rates, different contract sizes or a different definition of a pip. Your platform’s contract specification is the one that counts.
Do I need to know this for spread betting? Less so, but you still need to know how the provider defines a point on each market, especially gold, oil and shares.
What if my account isn’t in pounds? The method is the same – convert into your account currency instead.
Disclaimer: This page is general education, not financial or investment advice or a personal recommendation, and it doesn’t take your circumstances into account. Examples are hypothetical, for illustration only, and not an invitation to buy or sell. Learning a strategy doesn’t guarantee profits. Past performance is not a reliable guide to future results. Futures, spread bets and CFDs are complex and carry a high risk of losing money quickly because of leverage, and most retail traders lose money. With a real futures account, losses can exceed your deposit. Only trade with money you can afford to lose, and speak to an independent FCA-authorised adviser if you’re unsure. Read our full risk warning.