Pips

A pip is the unit traders use to measure how far a price has moved. It sounds like jargon, but it is simply a fixed step in the price, and once you can spot it in a quote you can describe any move precisely and compare it with any other. This lesson shows where the pip sits in a price and what makes one pip worth more or less.

Where a pip sits in the price

A pip is the standard smallest unit by which a currency pair's price conventionally moves. For most pairs it is the fourth decimal place of the quote. For pairs that involve the Japanese yen it is the second decimal place, because those pairs are quoted to fewer decimals.

• For most pairs, if EUR/USD moves from 1.1050 to 1.1051, that is a one pip move in the fourth decimal.
• For JPY pairs, if USD/JPY moves from 150.10 to 150.11, that is a one pip move in the second decimal.

Many platforms show one more decimal than the pip: a fifth decimal for most pairs and a third for JPY pairs. That extra digit is a fractional pip, often called a pipette, and it equals one tenth of a pip. It simply lets prices be quoted more precisely.

What a pip is worth

The number of pips a price moves is fixed, but the money value of each pip depends on how large your position is. A larger position means each pip represents more money, and a smaller position means each pip represents less. So the same 10 pip move can mean very different amounts on two different accounts.

As an illustration, on many pairs quoted in US dollars, one pip is worth about 10 dollars on a standard lot of 100,000 units, about 1 dollar on a mini lot of 10,000 units, and about 0.10 dollars on a micro lot of 1,000 units. Position sizes and lots are covered in their own lesson.