Definition
PipA pip is the standard unit for measuring how much a currency pair's price changes: 0.0001 for most pairs and 0.01 for pairs quoted in Japanese yen.
Example
If EUR/USD moves from 1.0850 to 1.0851, it has moved one pip. If USD/JPY moves from 150.20 to 150.45, it has moved 25 pips.
In detail
"Pip" is commonly explained as short for "percentage in point" or "price interest point." Whatever its origin, it gives traders a shared unit for price movement, spreads, stop distances and targets.
- For most pairs (EUR/USD, GBP/USD, AUD/USD), one pip is the fourth decimal place: 0.0001.
- For pairs where the Japanese yen is the quote currency (USD/JPY, EUR/JPY), one pip is the second decimal place: 0.01.
Most brokers quote one extra decimal, called a pipette or fractional pip. In EUR/USD at 1.08503, the final 3 is pipettes, not pips.
Pip value
How much a pip is worth depends on the trade size and the pair:
Pip value = (pip size ÷ exchange rate) × units
That formula gives the value in the base currency. A simpler route when your account currency is the quote currency: pip value = pip size × units.
| Pair (illustrative rate) | 1 standard lot pip value |
|---|---|
| EUR/USD | $10.00 |
| USD/JPY at 150.00 | 1,000 JPY = about $6.67 |
| USD/CHF at 0.8800 | 10 CHF = about $11.36 |
Example
Assume (illustratively) you buy 0.3 lots of AUD/USD at 0.6620 and close at 0.6668.
- Movement: 0.6668 − 0.6620 = 0.0048, or 48 pips
- Pip value: 0.3 × $10 = $3
- Profit: 48 × $3 = $144, before costs
Why it matters
Pips let you compare risk and reward across pairs and position sizes. A 30-pip stop on one lot is a very different dollar risk on EUR/USD than on a pair with a different pip value, so always convert pips into money before you trade. The Pip Calculator handles the conversion for any pair, and the What Is a Pip lesson covers the basics step by step.
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Related terms
- PipetteA pipette is one-tenth of a pip, the extra decimal place most brokers show in forex quotes: 0.00001 for most pairs and 0.001 for yen-quoted pairs.
- LotA lot is a standardized trade size in forex. One standard lot is 100,000 units of the base currency; mini and micro lots are 10,000 and 1,000 units.
- SpreadThe spread is the difference between the ask (buy) price and the bid (sell) price of a currency pair. It is a built-in cost paid on every trade.
- Quote CurrencyThe quote currency is the second currency in a forex pair. Prices, pip values and profit or loss on that pair are all expressed in it.