A pip (percentage in point) is the smallest standardized price movement in a forex pair. For most currency pairs — EUR/USD, GBP/USD, USD/CAD, and others — one pip equals 0.0001 (one-hundredth of one percent). For Japanese yen pairs like USD/JPY and EUR/JPY, one pip equals 0.01.
How Pips Work
When EUR/USD moves from 1.0850 to 1.0855, it has moved 5 pips. When it moves from 1.0850 to 1.0750, it has moved 100 pips in the trader's favor (for a short) or against them (for a long).
Most brokers now quote to five decimal places for standard pairs and three for JPY pairs. The fifth decimal is called a pipette or fractional pip — worth 0.1 of a pip. A move from 1.08500 to 1.08512 is 1.2 pips.
Pip Value
The dollar value of a pip depends on three things: which pair you're trading, your lot size, and (for non-USD pairs) the current exchange rate. For pairs where USD is the quote currency (EUR/USD, GBP/USD):
- 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
For pairs where USD is the base currency (USD/CAD, USD/JPY), the pip value fluctuates with the exchange rate. The Pip Value Calculator handles this for all major pairs.
Why Pips Matter for Risk Management
Setting a 30-pip stop loss sounds precise, but means very different things at different lot sizes. At a standard lot, 30 pips = $300. At a micro lot, 30 pips = $3. This is why knowing your pip value before placing a trade is essential — it's the conversion rate between chart levels and real money.