The fourth decimal, the smallest stride:a pip is how a move's described.
The smallest standard price movement in a currency pair.
For most pairs, 1 pip equals 0.0001 (the fourth decimal place). For JPY pairs, 1 pip equals 0.01 (the second decimal place).
In plain words
A pip is the standard unit for measuring a change in an exchange rate. For most pairs it is the fourth decimal place, 0.0001; for pairs quoted in Japanese yen it is the second, 0.01. Many platforms show one further digit, a tenth of a pip.
pip value = pip size × contract size × lots
See it move
Price has reached 1.1001
Why it matters
Spreads, price moves, stop distances and results are all counted in pips, so the pip is the common unit that makes trades comparable. What a pip is worth in money depends on the size of the trade and on the quote currency.
Worked example
An example only. The figures are round and invented for the arithmetic: they are not market prices.
EUR/USD moves from 1.1000 to 1.1025 on a position of 0.5 standard lots.
- 1Move1.1025 − 1.1000 = 0.0025, or 25 pips
- 2Pip value0.0001 × 100,000 × 0.5 = 5 US dollars
- 3Result25 × 5 = 125 US dollars
The 25-pip move is worth 125 US dollars on half a lot: a gain for a long position and a loss for a short one.
A common mistake
A pip is not worth the same on every pair. Its value arises in the quote currency, so one pip on a yen pair is 1,000 yen per standard lot, which must be converted before it can be compared with 10 dollars on a dollar-quoted pair.
Check yourself
Learn more
- Academy lessonUnderstanding currency pairsBase and quote currencies, bid and ask, the spread, and the difference between major, minor and exotic pairs.
- Academy lessonPosition sizingLot sizes, the percent-risk model, fixed-fractional sizing and the Kelly criterion, with the formulae and a worked example.
- GuidePosition sizing: the arithmetic of risk per tradeFixed percentage, fixed amount, Kelly and volatility-based sizing, with the formula and a worked example for each.
Educational information, not investment advice or a recommendation to trade.