A pip stands for “percentage in point”.
It represents the smallest standardized price movement in a currency pair.
🔹 Standard Definition
- For most currency pairs:
1 pip = 0.0001 (4th decimal place)
✅ Example:
If EUR/USD moves:
- 1.1000 → 1.1001 = 1 pip
- 1.1000 → 1.1010 = 10 pips
💡 Special Case (JPY Pairs)
For pairs involving Japanese Yen:
- 1 pip = 0.01 (2nd decimal place)
✅ Example:
If USD/JPY moves:
- 110.00 → 110.01 = 1 pip
- 110.00 → 110.10 = 10 pips
⚡ What is a Pipette?
Modern brokers show extra precision using pipettes:
- 1 pip = 10 pipettes
- Pipette = 0.00001 (5th decimal place)
Example:
- 1.10005 → 1.10006 = 1 pipette
- 1.10005 → 1.10015 = 1 pip (10 pipettes)
💰 How Much is a Pip Worth?
The value of a pip depends on:
- Lot size (trade size)
- Currency pair
- Exchange rate
📦 Lot Sizes and Pip Value
| Lot Type | Units | Pip Value (USD pairs) |
|---|---|---|
| Standard Lot | 100,000 | ~$10 per pip |
| Mini Lot | 10,000 | ~$1 per pip |
| Micro Lot | 1,000 | ~$0.10 per pip |
✅ Example Calculation
You trade 1 standard lot of EUR/USD:
- Price moves +10 pips
- Profit = 10 × $10 = $100
📉 Why Pips Matter
1. Profit & Loss
All gains/losses are measured in pips:
- +50 pips = profit
- -30 pips = loss
2. Spread (Broker Cost)
The spread is measured in pips:
- Buy price: 1.1001
- Sell price: 1.1000
👉 Spread = 1 pip
3. Risk Management
Traders use pips to set:
- Stop-loss (e.g., -20 pips)
- Take-profit (e.g., +50 pips)
🧠 Real Trade Example
You buy EUR/USD at 1.1000
- Stop-loss: 1.0980 (−20 pips)
- Take-profit: 1.1050 (+50 pips)
If price hits:
- 1.1050 → +50 pips profit
- 1.0980 → −20 pips loss
⚠️ Important Tip
A pip is small, but with leverage, even small pip movements can lead to:
- Big profits ✅
- Big losses ❌
🧾 Quick Summary
- Pip = smallest price move in forex
- Usually 0.0001 (or 0.01 for JPY pairs)
- Used to measure profit, loss, spread, and risk
- Value depends on lot size and pair