What is a Pip?
A pip (percentage in point) is the smallest price movement in the exchange rate of a currency pair. For most currency pairs, a pip is the fourth decimal place (0.0001), while for JPY pairs it is the second decimal place (0.01). Knowing the pip value helps you understand the monetary impact of price movements on your trade.
How Pip Value is Calculated
For currency pairs where USD is the quote currency (e.g., EUR/USD), one pip for a standard lot (100,000 units) equals $10. For pairs where USD is the base currency (e.g., USD/JPY), the pip value depends on the exchange rate. The formula is:
- USD quote pairs: Pip Value = Lot Size x 100,000 x 0.0001
- JPY pairs: Pip Value = Lot Size x 100,000 x 0.01 / Exchange Rate
- USD base pairs: Pip Value = Lot Size x 100,000 x 0.0001 / Exchange Rate
