Lots and pips in brief
A standard lot is 100,000 units of the base currency, a mini lot 10,000 and a micro lot 1,000. The pip is the fourth decimal of the price (0.0001), except on yen pairs, where it is the second (0.01).
The pip value
On pairs quoted in dollars (EUR/USD, GBP/USD, AUD/USD) a pip is worth $10 per standard lot, $1 per mini lot and $0.10 per micro lot.
On other pairs the value depends on the exchange rate: on USD/JPY a pip is worth 1,000 yen per lot, about $6.70 with the rate at 150. If your account is in euros, convert the pip value into euros at the current rate.
The formula
Lots = (capital × risk %) ÷ (stop in pips × pip value per lot). First decide how much you're willing to lose, then put the stop where the setup is invalidated: the size is the result, not the starting point.
Step-by-step example
$5,000 account, 1% risk = $50. Short on GBP/USD with a 25-pip stop. Lots = 50 ÷ (25 × 10) = 0.2 lots. If the stop is hit you lose $50, excluding spread and fees.
Same account, long on USD/JPY with a 40-pip stop and a pip at about $6.70: lots = 50 ÷ (40 × 6.70) ≈ 0.186. Always round down: 0.18 lots.