What is a Pip?
A pip (percentage in point or price interest point) is the smallest price move that a given exchange rate can make based on market convention.
Definition
In forex trading, a pip represents the fourth decimal place in most currency pairs (0.0001). It's the standard unit for measuring how much an exchange rate has changed in value.
How Pips Work
For most currency pairs like EUR/USD, GBP/USD, and USD/CHF, a pip is equal to 0.0001. This means if EUR/USD moves from 1.1050 to 1.1051, it has moved 1 pip.
Exception: Japanese Yen Pairs
For currency pairs involving the Japanese yen (JPY), a pip is the second decimal place (0.01). If USD/JPY moves from 146.75 to 146.76, it has moved 1 pip.
Examples
Standard Currency Pairs
- EUR/USD: 1.1050 → 1.1100 = 50 pips
- GBP/USD: 1.2700 → 1.2750 = 50 pips
- USD/CHF: 0.9100 → 0.9150 = 50 pips
Japanese Yen Pairs
- USD/JPY: 146.75 → 147.25 = 50 pips
- EUR/JPY: 160.50 → 161.00 = 50 pips
Why Pips Matter
Understanding pips is essential for:
- Calculating Profit/Loss: Your trading results are measured in pips
- Setting Stop Losses: You define risk in terms of pips
- Position Sizing: Pip value helps determine appropriate lot sizes
- Comparing Performance: Trading strategies are evaluated by pips gained
Calculating Pip Value
The monetary value of a pip depends on:
- The currency pair being traded
- The lot size (standard, mini, or micro)
- Your account currency
💡 Calculate Pip Values
Use our Pip Value Calculator to determine how much each pip is worth for your specific trade setup.