A pip, short for “percentage in point”, is a standardised unit that measures the smallest price movement in a Forex pair. For most major pairs, one pip equals 0.0001, except for yen pairs where it equals 0.01. Pips are used to calculate price changes, profit, and loss. Understanding pip values is essential for risk management, especially when determining lot size and leverage. Many brokers now quote prices to a fifth decimal, introducing fractional pips or “pipettes” for greater price accuracy.
Example:
For example, if EUR/USD moves from 1.1000 to 1.1050, that’s a 50-pip gain.
