Pips in Forex trading: definition

The smallest usual unit

The pip (“percentage in point”) is the unit of change in an exchange rate. For most pairs, it is the fourth decimal place, i.e. 0.0001. If EUR/USD moves from 1.1050 to 1.1075, it has risen 25 pips.

Yen pairs are the exception: their price has only two or three decimals and the pip is 0.01. A USD/JPY moving from 150.20 to 150.50 has risen 30 pips.

Pips and pipettes

Most platforms show one more decimal: 1.10503 instead of 1.1050. That last digit is the pipette, a tenth of a pip. Confusing the two means getting a stop distance wrong by a factor of ten.

What a pip is worth

A pip's value depends on position size. On EUR/USD, a pip is worth 10 dollars for a standard lot of 100,000 euros, 1 dollar for a mini lot of 10,000, and 0.10 dollar for a micro lot of 1,000.

The general formula is: pip value = pip size × number of units, expressed in the quote currency (the second in the pair). For a euro account, it is then converted at the day's rate. This calculation is what lets you set a position size from the risk you accept.

Frequently asked questions

How much is a pip worth on EUR/USD?

10 dollars per standard lot (100,000 units), 1 dollar per mini lot and 0.10 dollar per micro lot.

Is there such a thing as a pip on gold?

The term is used, but its size varies between brokers, often 0.01 or 0.1 dollar. Check the contract specification with your broker.