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A micro lot in Forex is one hundredth of a full (standard Forex) lot. In some but not all pairs, one standard lot has a pip value of $10. A pip is the smallest increment, like the quanta of Forex moves. Forex pairs (the markets which are traded) move in complex ways, that is they tend not to simply move in one direction.

In general, traders trade on direction. So what this means is that a typical trade will see the value of a pip either added and subtracted from the account value as it changes value, depending on whether the Forex pair is moving in or against the traded direction. The effect of this is not realised until the position is closed. However as negative value builds up it can trigger a stop-loss (set by the trader) or a stop-out (set by the system), which is a percentage of the account size. This then realises the accumulated pip amount in the account.

Thus it can be seen that the pip value is related to the account size. That is, in general the account must be of sufficient size to manage standard lots. The trader can trade normally with larger pip values, for example setting multiples of standard lots. Traders especially beginners may not be able to or want to trade with such a large pip value.

There is a way to deal with this issue, and that is to use smaller lots sizes. Typically brokers offer micro lots sizes. Exceptions can include some account types which may have a higher minimum lot size (and normally a higher minimum deposit).

In the case where one standard lot has a pip value of $10, then a micro lot has a pip value one hundredth of $10, which is to say 10 cents. Assuming that a beginner or less experienced trader may tend to trade in such a way as they they amplify the tendency for the market to move against the traded position, then such a trader may find the inevitable retracements more manageable, if the pip value is 10 cents versus $10. Conversely, a move in favour of the trader will be worth considerably less. However it can be helpful to assume retacements or even full scale reversals (when a retracement's depth signals a different direction), rather than assuming the reverse, when planning a trade. So given that these retracements will happen, it may be asked: what pip value is manageable.

Leverage and pip value are separate factors. What leverage potentially allows is for the trader to trade with higher pip values, as leverage increases. It can be seen that this is why increasing leverage increases risk, as the trader is consequently exposed to higher move values for adverse moves (which can be expected) but with a smaller account size to cushion the effect. If the trader wants to be able to trade markets with lower leverage, then they can consider a cent account. A cent account denominates itself in cents. So the units are one hundredth of a standard account setting. This means that a micro lot on a cent account is one hundredth of the value of a standard micro lot. Which means that moves with very small pip values can be traded, and the account size can be considerably smaller. A similar effect may be achieved with increasing leverage, but increasing leverage increases risk.