What is a pip? A plain-English guide for new traders

If you have looked at a currency chart, you have probably seen moves described in pips. The word is short for “percentage in point” or “price interest point”, and it gives traders a common unit for talking about price changes without writing out long decimals.

What a pip measures

For most currency pairs, one pip is a move in the fourth decimal place: 0.0001. If EUR/USD moves from 1.0850 to 1.0865, it has moved 15 pips. Many platforms also show a fifth decimal, called a pipette or fractional pip, which is one tenth of a pip.

Pairs quoted in Japanese yen

Pairs that include the Japanese yen, such as USD/JPY, are quoted with fewer decimals. For these, one pip is a move in the second decimal place: 0.01.

• EUR/USD 1.0850 → 1.0851 = 1 pip
• GBP/USD 1.2700 → 1.2650 = 50 pips
• USD/JPY 151.20 → 151.35 = 15 pips

How pip value works

A pip on its own is just a price unit. What it is worth depends on the size of your position. One standard lot of EUR/USD is 100,000 euros, so a one-pip move is worth about USD 10. A mini lot (0.1) is worth about USD 1 per pip, and a micro lot (0.01) about USD 0.10.

Pip value scales with position size: the same 20-pip move means very different amounts on 0.01 lots and on 1 lot.

For pairs where the US dollar is not the second currency, pip value also depends on the current exchange rate. Our pip calculator works this out for you in your account currency.

Pips, spreads and trading costs

The spread — the gap between the buy and sell price — is usually quoted in pips too. A spread of 0.9 pips on EUR/USD means the price has to move 0.9 pips in your favour before a new position breaks even, before any commission or swap.

Why pips matter for risk

Thinking in pips helps you size positions. If you know how many pips away your stop loss is and what each pip is worth, you can work out the most you could lose on a trade before you open it. The position size calculator does exactly that.

1. Decide how much of your balance you are prepared to risk.
2. Measure the distance to your stop loss in pips.
3. Divide the risk amount by (stop distance × pip value per lot) to get a lot size.

You can look up any other term in our trading glossary.