What is a pip?
A pip is the standard unit used to measure a change in a currency pair's price. For most pairs a pip is a move of 0.0001, the fourth decimal place, so EUR/USD rising from 1.0850 to 1.0851 is a one-pip move. For pairs quoted in Japanese yen, such as USD/JPY, a pip is 0.01, the second decimal place. On a standard lot of EUR/USD, one pip is worth $10.
The word is usually expanded as "percentage in point" or "price interest point". Whatever you call it, the pip gives traders a shared yardstick. Instead of saying a price moved by 0.0045, you say it moved 45 pips, and anyone trading that pair knows what you mean regardless of their account size.
Pip size by currency pair
The size of a pip depends on how the pair is quoted, not on how volatile it is.
| Pair type | Example quote | One pip | Example one-pip move |
|---|---|---|---|
| Most pairs (four-decimal pricing) | EUR/USD 1.0850 | 0.0001 | 1.0850 to 1.0851 |
| JPY pairs (two-decimal pricing) | USD/JPY 150.25 | 0.01 | 150.25 to 150.26 |
The same JPY rule applies to crosses such as EUR/JPY, GBP/JPY and AUD/JPY. If you are new to how pairs are written and which currency is which, read our guide to currency pairs first.
Pips vs pipettes
Most brokers now quote prices with one extra decimal place: five decimals for most pairs and three for JPY pairs. That extra digit is a fractional pip, often called a pipette, and it equals one tenth of a pip. If EUR/USD shows 1.08503, the final 3 is pipettes. A move from 1.08500 to 1.08530 is 30 pipettes, which is 3 pips. Mixing up pips and pipettes is a common beginner error when setting stop-loss distances, so always check which one your platform is displaying.
How to calculate pip value
Pip size tells you how far price moved. Pip value tells you how much money that move is worth on your position. The basic formula is:
Pip value (in the quote currency) = pip size x position size in units
If the quote currency is not your account currency, you convert the result at the current exchange rate. Position size is measured in lots, which are covered in detail in our guide to forex lot sizes. As a reminder, a standard lot is 100,000 units, a mini lot is 10,000 and a micro lot is 1,000.
Example 1: EUR/USD with a USD account
EUR/USD is quoted in US dollars, so no conversion is needed for a USD account.
- Standard lot: 0.0001 x 100,000 = $10 per pip
- Mini lot: 0.0001 x 10,000 = $1 per pip
- Micro lot: 0.0001 x 1,000 = $0.10 per pip
The same $10 per standard lot applies to any pair where USD is the quote currency, such as GBP/USD, AUD/USD and NZD/USD.
Example 2: USD/JPY with a USD account
Here the quote currency is yen, so the pip value first comes out in JPY. Assume USD/JPY is trading at 150.00.
- Pip value in JPY for one standard lot: 0.01 x 100,000 = 1,000 yen
- Converted to USD: 1,000 / 150.00 = about $6.67 per pip
Because the conversion uses the live rate, the dollar value of a pip on USD/JPY changes as the price changes. At 140.00 it would be 1,000 / 140 = about $7.14.
Example 3: USD/CHF with a USD account
Assume USD/CHF is at 0.9000. One standard lot gives 0.0001 x 100,000 = 10 Swiss francs per pip. Converted to dollars: 10 / 0.9000 = about $11.11 per pip.
You do not need to do these conversions by hand every time. The pip value calculator handles the conversion for any pair and account currency.
Turning pips into profit or loss
Once you know the pip value, profit or loss is simple multiplication:
Profit or loss = pips gained or lost x pip value per lot x number of lots
Suppose you buy 0.5 lots of EUR/USD at 1.0850 and sell at 1.0875. That is a gain of 25 pips. Pip value for 0.5 lots is 0.5 x $10 = $5, so the trade makes 25 x $5 = $125 before costs. If price had instead fallen to 1.0830 and you closed there, the loss would be 20 pips x $5 = $100.
Costs matter too. The spread is also measured in pips, so a 1-pip spread on that 0.5-lot trade costs $5 the moment you enter. Our guide to forex spreads explains how that cost works. To check a full trade outcome, including size, you can use the profit calculator.
Why pips matter for risk management
Pips are the bridge between a chart and your account balance. You place a stop-loss a certain number of pips away, and pip value turns that distance into a dollar amount. That is the basis of position sizing.
For example, say you have a $10,000 account and want to risk 1% ($100) on a trade with a 40-pip stop on EUR/USD. You need a pip value of $100 / 40 = $2.50 per pip. Since a standard lot is $10 per pip, that works out to 0.25 lots. If you instead used one full standard lot with the same stop, you would be risking $400, four times your plan.
This is why experienced traders think in pips and percentages rather than in "how many lots feel right". The position size calculator does the arithmetic, and our risk management basics lesson explains how to choose the risk percentage in the first place.
Pips on other markets
The pip is a forex convention. Other markets use their own units: stocks move in cents, futures move in ticks, and many brokers describe index and commodity CFDs in "points". Some platforms also label a one-unit move on gold or an index as a pip, but the size varies by broker and instrument. Before trading anything outside spot forex, check the contract specification for the minimum price move and its value per contract or lot.
Common mistakes with pips
- Confusing pips with pipettes. A 20-point stop on a five-decimal platform may be only 2 pips.
- Assuming every pair is $10 per pip. That only holds for pairs quoted in your account currency.
- Forgetting JPY pairs use 0.01. Using 0.0001 on USD/JPY would make your pip count 100 times too large.
- Ignoring that pip value changes. For cross pairs and pairs not quoted in your account currency, pip value moves with exchange rates.
Trading forex involves substantial risk of loss, and leverage can magnify losses as well as gains. The examples on this page are for education only and are not financial advice. Read our full risk disclaimer before trading.