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What Is a Pip in Forex? Pip Value Explained With Examples
Learn what a pip is, how pip value is calculated and why it matters for every trade you place.
Learn what a pip is, how pip value is calculated and why it matters for every trade you place.
If you trade forex, almost every number you look at is measured in pips: your spread, your stop-loss distance, your profit target and how far the market moved today. Understanding pips, and what each one is worth in money, is the foundation of managing risk.
A pip, short for "percentage in point" or "price interest point", is the standard unit used to measure a change in a currency pair's price. For most pairs a pip is the fourth decimal place, or 0.0001. If EUR/USD moves from 1.0850 to 1.0851, it has moved one pip.
Pairs that include the Japanese yen are the main exception. Because the yen has a much lower value per unit, the pip is the second decimal place, or 0.01. If USD/JPY moves from 150.25 to 150.26, that is one pip.
Most platforms, including TradeLocker, quote prices to an extra decimal place. That fifth decimal (or third for JPY pairs) is called a pipette, or fractional pip, and is worth one tenth of a pip. A quote of 1.08505 means EUR/USD is half a pip above 1.0850.
A pip on its own is just a price increment. What matters for your account is how much money a one-pip move is worth, which depends on your trade size. The formula is:
Pip value = pip size × contract size × number of lots
The answer comes out in the pair's quote currency (the second currency in the pair). If that isn't your account currency, you convert it at the current exchange rate.
One standard lot is 100,000 units. 0.0001 × 100,000 = $10 per pip. A mini lot (0.10) is worth $1 per pip, and a micro lot (0.01) is worth $0.10.
0.01 × 100,000 = ¥1,000 per pip per lot. With USD/JPY at 150.00, that is ¥1,000 ÷ 150 = about $6.67 per pip.
0.0001 × 100,000 = £10 per pip per lot. If GBP/USD is 1.27, that is about $12.70 per pip for a USD account.
You can skip the arithmetic with our free pip value calculator.
Pip value turns a chart distance into a money amount. Suppose your stop-loss is 30 pips away. On one lot of EUR/USD that's a $300 risk; on 0.10 lots it's $30. Without knowing pip value, you can't know how much you're really risking.
This is why professional traders size every position from the stop-loss outwards: decide the maximum you're willing to lose, measure the stop distance in pips, then pick the lot size that makes those two numbers match. Our position size calculator does exactly that.
Outside forex, the idea of a "pip" is less standardised. Gold is often measured in moves of $0.01 or $0.10 per ounce, and indices and crypto are usually measured in points. Always check the contract specifications in your platform so you know what one unit of movement is worth.
CFDs are leveraged products and you can lose your money. This article is for education only and is not investment advice.