What Is a Pip in Forex? Meaning, Pip Value & Examples

How a pip works

Currency prices are quoted to a fixed number of decimal places, and a pip is the standard unit used to measure changes in those prices. For EUR/USD, a move from 1.0850 to 1.0851 is a rise of one pip; a move from 1.0850 to 1.0900 is a rise of 50 pips.

For pairs quoted in Japanese yen the pip is the second decimal place. A move in USD/JPY from 150.25 to 150.26 is one pip.

Pips vs pipettes

Most brokers quote one digit more than the pip — five decimal places for most pairs and three for JPY pairs. That extra digit is a pipette, worth one tenth of a pip. This is why a pip is a standardised unit rather than the smallest possible price change.

Pipettes and pips on EUR/USD

• 1.08500 → 1.08501 = 1 pipette (0.1 pip)
• 1.08500 → 1.08510 = 1 pip
• 1.08500 → 1.08575 = 7.5 pips

Pip vs point: are they the same?

Not necessarily. In MetaTrader 4 and MetaTrader 5, a point is the smallest price increment the platform quotes for a symbol. On a five-decimal EUR/USD quote, one point is 0.00001 — a pipette — so 10 points = 1 pip. On other platforms, or for other instruments such as indices and gold, “point” can mean something different.

How to calculate pip value

pip value = pip size × position size (units) × quote-to-account rate

In plain terms: the pip value is first worked out in the pair’s second currency (the quote currency), and the quote-to-account rate converts it into your account currency. When the quote currency is your account currency — for example EUR/USD on a USD account — that rate is simply 1.

Worked example

You buy 1 standard lot of EUR/USD on a USD account. A standard lot is 100,000 units of the base currency — here, €100,000.

1. Pip size = 0.0001
2. Pip value = 0.0001 × 100,000 × 1 = $10 per pip
3. If the price rises 25 pips, the profit is 25 × $10 = $250 (before costs).

Worked example: a JPY pair

You buy 1 standard lot of USD/JPY at 150.00 on a USD account. Because the US dollar is the base currency here, 1 standard lot is 100,000 US dollars (not 100,000 yen).

1. Pip size = 0.01
2. Pip value in yen = 0.01 × 100,000 = ¥1,000
3. Converted to USD: ¥1,000 ÷ 150.00 = about $6.67 per pip

You can skip the maths with our pip value calculator.

Pip value by lot size

Lot type	Units	Pip value (EUR/USD, USD account)
Standard lot	100,000	$10.00
Mini lot	10,000	$1.00
Micro lot	1,000	$0.10

These values apply to pairs whose quote currency is the US dollar, such as EUR/USD, GBP/USD and AUD/USD, traded from a USD account. See what is a lot? for more on position sizes.

Why pips matter

Pips give traders a common unit for describing price moves regardless of a pair’s price level, and most of the numbers that define a trade are expressed in them:

• Spread: the cost of opening a trade is quoted in pips — for example a 1.2-pip spread.
• Stop-loss and take-profit: exits are usually set a number of pips from the entry price — for example a 25-pip stop loss and a 50-pip take profit.
• Risk/reward ratio: comparing those distances gives the ratio between potential loss and potential gain — 25 pips of risk for 50 pips of target is 1:2.
• Risk per trade and position sizing: the stop distance in pips, the pip value and the amount you are prepared to risk together determine the position size.

From pips to position size

USD account of $5,000, risk per trade 1% ($50), 25-pip stop on EUR/USD, pip value about $10 per standard lot:

$50 ÷ (25 × $10) = 0.20 lots. If the stop is hit, the loss is about $50 before costs.

The position size calculator does this for any pair and account currency.