Pip
Also called: point
The smallest standard price change in a currency pair — usually the 4th decimal place (or 2nd for JPY pairs).
Definition
‘Pip’ stands for ‘point in percentage’ (or ‘price interest point’). On EUR/USD at 1.0800, a 1-pip move takes price to 1.0801. On USD/JPY at 150.00, a 1-pip move takes price to 150.01.
Pip value depends on lot size and quote currency. On a standard lot of EUR/USD, 1 pip = $10. On a mini lot, $1. On a micro lot, $0.10.
Example
Buy EUR/USD at 1.0800, sell at 1.0850. That's a 50-pip profit. On a 1-lot trade, P&L = 50 × $10 = $500.
Formula
Pip value (USD pairs) = (0.0001 / Exchange rate) × Lot size in base currency
Why it matters
JPY pairs are quoted to 2 decimal places, so a pip is 0.01 (not 0.0001). Always check the broker's pip definition before sizing a trade.
FAQs
Why is a pip the 4th decimal?
Historical convention from when major pairs were quoted to 4 decimals. Modern brokers usually quote to 5 (fractional pip = pipette) for tighter pricing.
Are pips the same for every pair?
Pip location is the same (4th decimal, or 2nd for JPY) — but pip value differs because the quote currency differs.