Every risk number you rely on — pip value, money per point, the cost of a stop — is built from three primitives: contract size, tick size and tick value. Get these three right and everything downstream is correct; get one wrong and every position you size is quietly off.
The three primitives
These are the raw numbers a broker publishes in the contract specification. They are the mechanics underneath "how much is a pip worth" — worth understanding directly, because platforms hide them behind a single lot field.
- Contract size — the units one lot represents. 100,000 units for a standard FX lot, 100 ounces for gold, 5,000 ounces for silver, and 1 contract per lot for most index and crypto CFDs.
- Tick size — the smallest price increment the instrument moves in. 0.00001 on a 5-digit FX pair, 0.01 on gold, 0.25 on the S&P E-mini.
- Tick value — the money one tick is worth for one lot, in the account currency. When the quote currency equals your account currency, tick value = contract size × tick size.
How they combine into money
Once you have those three, the money value of any move follows mechanically. Divide the tick value by the tick size and you get what a full 1.0 price move is worth per lot; multiply by your lots and you have your exposure per point:
value per 1.0 move = (tick value ÷ tick size) × lots
A pip is just a chosen number of ticks. On a 5-digit FX pair one pip is ten ticks (0.0001 vs 0.00001), so a fractional-pip quote does not change what a pip is worth — it only changes how finely the price is displayed. Confusing the two is one of the most common sizing errors.
A worked example
Gold with a contract size of 100 ounces and a tick size of 0.01. If the quote currency is your account currency, the tick value is 100 × 0.01 = 1.00 per tick per lot. A full 1.00 move in the gold price is 100 ticks, so it's worth 100 per lot. Trade 0.10 lots and one point of gold is 10; a 3.00 stop (300 ticks) costs 30.
Contract size 100 × tick size 0.01 → 1.00 per tick → 100 per point → 10 per point at 0.10 lots.
Now compare an index CFD with contract size 1 and tick size 1: one point is worth 1 per lot, so 0.10 lots is 0.10 per point. Same 0.10 lots, wildly different money — and the only thing that changed is the three primitives. This is the mechanism behind why the same lot size is not the same risk on every instrument or broker.
Where the mechanics bite algorithmic traders
An EA that reads price levels, computes stop distances in points, or converts a signal into a lot size is doing this arithmetic internally. If the broker's contract spec differs from what the EA assumes, every calculation inherits the error:
- Digits mismatch — a strategy written for 4-digit quotes running on a 5-digit feed reads stops ten times too tight (or too wide) unless it normalizes by tick size.
- Inverse or cross-quoted instruments — where the quote currency isn't your account currency, tick value is no longer contract size × tick size; it carries an FX conversion.
- Redefined index contracts — one broker's US30 at 1 per point versus another's at 0.1 or 10 changes money-per-point by an order of magnitude for the same lot.
- Assuming pip = tick — deriving stop cost from tick value without the tick-to-pip ratio over- or under-states risk.
Verify these before trusting a size
- Read the broker's contract specification for contract size, tick size and tick value — don't infer them from the symbol name.
- Confirm the number of digits and whether quotes are fractional-pip.
- Check whether the quote currency matches your account currency; if not, expect an FX-adjusted tick value.
- Recompute money-per-point after any broker or symbol change, not just once.
See it move
The Pip / Tick Value Calculator below lets you enter contract size, tick size and (optionally) tick value for any instrument and watch the money value fall out. Leave tick value blank and it derives it as contract size × tick size; fill it in to match a broker whose quote currency differs. It shows the value per tick, the value of a full 1.0 move, and what 1 and 10 points are worth at your chosen lot size — the exact chain that turns three spec numbers into real exposure.
Takeaway
Pip value and money-per-point are not fundamental — they are derived from contract size, tick size and tick value. Learn to read those three off a contract spec and you can predict the risk of any instrument on any broker before you place a single trade, instead of discovering it from your equity curve.
