What is a Pip?

A pip is the smallest price movement in forex trading, typically the fourth decimal place (0.0001) for most currency pairs, used to measure price changes and calculate profits or losses.

Last updated: January 2025

Key Takeaways

A pip (Percentage in Point) is the smallest price movement in forex trading
For most currency pairs, 1 pip = 0.0001 (4th decimal place)
For JPY pairs, 1 pip = 0.01 (2nd decimal place)
Pip value depends on the currency pair, position size, and account currency
Understanding pips is crucial for calculating profits, losses, and risk
Brokers now quote prices to 5 decimal places (pipettes = 1/10th of a pip)

Understanding Pips

Pip Locations by Currency Pair

Most Currency Pairs

EUR/USD: 1.0850

4th decimal place = 1 pip

Examples: EUR/USD, GBP/USD, AUD/USD

Japanese Yen Pairs

USD/JPY: 150.25

2nd decimal place = 1 pip

Examples: USD/JPY, EUR/JPY, GBP/JPY

Pip Value Formula

Pip Value = (One Pip / Exchange Rate) × Position Size

One Pip:0.0001 (or 0.01 for JPY)

Exchange Rate:Current market price

Position Size:Lot size in units

Position Sizes and Pip Values

Standard Lot

100,000

units

≈ $10 per pip

Mini Lot

10,000

units

≈ $1 per pip

Micro Lot

1,000

units

≈ $0.10 per pip

*Approximate values for major USD pairs. Actual pip values vary by currency pair and exchange rate.

Pip Calculation Example - EUR/USD

You buy 1 standard lot of EUR/USD at 1.0850. The price rises to 1.0900.

Entry Price:1.0850

Exit Price:1.0900

Price Movement:0.0050

1.0900 - 1.0850

Movement in Pips:50 pips

0.0050 ÷ 0.0001

Position Size:100,000 units

1 standard lot

Pip Value:$10

(0.0001 ÷ 1.0850) × 100,000

Profit:$500

50 pips × $10 per pip = $500 profit

Pip Calculation Example - USD/JPY

You sell 2 mini lots of USD/JPY at 150.00. The price falls to 149.50.

Entry Price:150.00

Exit Price:149.50

Price Movement:0.50

150.00 - 149.50

Movement in Pips:50 pips

0.50 ÷ 0.01

Position Size:20,000 units

2 mini lots

Pip Value:$1.34

(0.01 ÷ 149.50) × 20,000

Profit:$67

50 pips × $1.34 per pip = $67 profit (sold, so price fall = profit)

Pip Calculation Tips

• For USD quote pairs (EUR/USD), pip values in USD are relatively stable
• For USD base pairs (USD/JPY), pip values fluctuate more with exchange rates
• Always use a pip calculator for precise values, especially for cross pairs
• Remember: 10 pipettes = 1 pip when using 5-decimal pricing
• Factor in spread costs - you need price to move beyond the spread to profit

Pip Calculation Tools

Pip Value Calculator

Calculate exact pip values for any currency pair

Position Size Calculator

Size trades based on pip risk

Risk-Reward Calculator

Plan trades using pip distances

Learn More

Understanding Spread

Spreads are measured in pips

Pip Value Basics Guide

Detailed guide on pip calculations

What is Forex?

Learn about currency pair pricing

Frequently Asked Questions

A pip stands for 'Percentage in Point' or 'Price Interest Point'. It's the standardized unit of measurement for changes in currency exchange rates. For most currency pairs, it's the fourth decimal place (0.0001), while for Japanese yen pairs, it's the second decimal place (0.01).