What Is a Pip?
The smallest unit of price change, and the foundation of everything.
Researched and written by Laurent The Basic Definition
A pip stands for "Percentage in Point" (or "Price Interest Point"). It is the standard unit of measurement for price changes in forex.
For most currency pairs, 1 pip = 0.0001 (the 4th decimal place).
For JPY pairs, 1 pip = 0.01 (the 2nd decimal place), because the yen is valued at roughly 150 per dollar, so the numbers are much larger:
Pipettes: Fractional Pips
Many brokers quote prices to one extra decimal place. These are called pipettes or "fractional pips."
Instead of EUR/USD at 1.0850, you might see 1.08505. That last digit (5) is a pipette, or 0.5 pips.
Instead of USD/JPY at 150.50, you might see 150.503. The last digit (3) is a pipette.
Pipettes allow for tighter spreads and more precise pricing. When you're counting pips, ignore the last digit unless you're tracking sub-pip precision.
How to Count Pips
This is the first skill you'll need. Let's practice:
| Pair | From | To | Pips | Direction |
|---|---|---|---|---|
| EUR/USD | 1.0850 | 1.0873 | 23 | Up |
| EUR/USD | 1.0850 | 1.0812 | 38 | Down |
| GBP/USD | 1.2700 | 1.2745 | 45 | Up |
| USD/JPY | 150.50 | 151.20 | 70 | Up |
| USD/JPY | 150.50 | 149.80 | 70 | Down |
| AUD/USD | 0.6520 | 0.6498 | 22 | Down |
How Much Is a Pip Worth?
The dollar value of a pip depends on three things: the currency pair, the lot size, and your account currency.
For pairs where USD is the quote currency (EUR/USD, GBP/USD, AUD/USD, NZD/USD), the math is simple:
| Lot Size | Units | Pip Value |
|---|---|---|
| Standard lot | 100,000 | $10 per pip |
| Mini lot | 10,000 | $1 per pip |
| Micro lot | 1,000 | $0.10 per pip |
| Nano lot | 100 | $0.01 per pip |
For pairs where USD is NOT the quote currency (USD/JPY, USD/CHF, USD/CAD), the pip value varies slightly depending on the exchange rate. But for practical purposes at the beginner level, the values are close to the table above.
Putting It Together
Let's trace a complete example:
- You buy 1 mini lot (10,000 units) of EUR/USD at 1.0850
- Price moves to 1.0885 (a 35-pip move in your favor)
- Pip value for 1 mini lot of EUR/USD = $1 per pip
- Your profit = 35 pips x $1 = $35
Now the same trade but with a standard lot:
- You buy 1 standard lot (100,000 units) of EUR/USD at 1.0850
- Price moves to 1.0885 (same 35-pip move)
- Pip value for 1 standard lot = $10 per pip
- Your profit = 35 pips x $10 = $350
Same move, 10x the profit, because the lot size was 10x bigger. This is why lot size (and by extension, leverage and position sizing) matters so much. We'll cover that in detail later.
Key Takeaways
- • A pip is the 4th decimal place for most pairs (0.0001), and the 2nd decimal for JPY pairs (0.01).
- • A pipette is 1/10th of a pip (the 5th decimal place).
- • Pip value depends on the pair, lot size, and your account currency.
- • For EUR/USD with a standard lot: 1 pip = $10. Mini lot: $1. Micro lot: $0.10.