Pip

What Is a Pip?

A pip is the smallest standard step in which a currency pair is usually quoted. Most pairs are quoted to four decimal places, so one pip is 0.0001. For example, if EUR/USD moves from 1.0850 to 1.0851, it has moved one pip. Pairs that involve the Japanese yen are typically quoted to two decimal places, so one pip for those pairs is 0.01.

How Pips Are Used

Pips are the common unit for describing price changes, trading profits and losses, and the bid-ask spread in the foreign exchange (forex) market. Traders often describe a result as a number of pips because the count stays the same regardless of position size.

To convert pips into money, you need the pip value, which depends on the lot size and the quote currency. A standard lot is 100,000 units of the base currency. For a pair quoted in US dollars, each pip on a standard lot is worth about $10, since 100,000 × 0.0001 = 10. Smaller positions have proportionally smaller pip values.

The basic relationship is:

Pip value = pip size × number of units traded

When the quote currency differs from the currency in which an account is kept, the result must also be converted at the current exchange rate.

Why It Matters to Investors

Pips give a consistent way to compare price moves across different pairs. Because a pip is very small, a move of a few dozen pips can produce a large gain or loss on a leverage-amplified position, which is why risk is often measured in pips as well.

Understanding pips helps a reader interpret quotes, trading reports, and risk figures. It does not, on its own, show whether a trade or a market is worth pursuing.