Glossary
Pip
The standard smallest quoted move in a currency pair: 0.0001 for most pairs and 0.01 for pairs quoted in Japanese yen.
On this page
A pip is the unit forex traders use to measure price changes in a currency pair. For most pairs it is the fourth decimal place, 0.0001; for pairs quoted in Japanese yen it is the second decimal place, 0.01. Speaking in pips lets traders compare moves and spreads across currencies with very different exchange rates.
How it works
If EUR/USD rises from 1.0850 to 1.0875, it has moved 25 pips. If USD/JPY falls from 151.40 to 150.90, it has moved 50 pips. Many platforms now quote one more digit, a fractional pip often called a pipette, so EUR/USD might show 1.08503.
What a pip is worth in money depends on the trade size and the quote currency. Forex sizes are counted in units of the base currency, with a standard lot of 100,000 units, a mini lot of 10,000 and a micro lot of 1,000.
Why it matters
- Spreads. Brokers quote their spread in pips, so a 1.2-pip spread on EUR/USD costs $12 per standard lot each round trip.
- Risk sizing. Traders set stops in pips and size positions so that the distance to the stop equals a fixed dollar risk. A 40-pip stop risking $200 implies $5 per pip, or half a standard lot.
- Leverage. Retail forex is usually traded with high Leverage, so a small move in pips can be a large share of the account.