Lesson 9 of 20
Pips and points
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A pip (percentage in point) is the standard unit of movement in forex. For most pairs it is the fourth decimal place: if EUR/USD moves from 1.0850 to 1.0851, that is one pip. For pairs quoted with the Japanese yen, a pip is the second decimal place: 156.20 to 156.21 is one pip.
Pips versus points
Most brokers quote an extra decimal — 1.08505 instead of 1.0850. That fifth digit is a point (also called a pipette), and ten points make one pip. Metals, indices and crypto usually talk in points rather than pips because their decimal structure is different.
| Instrument | 1 pip is | Example move |
|---|---|---|
| EUR/USD | 0.0001 | 1.0850 → 1.0860 = 10 pips |
| USD/JPY | 0.01 | 156.20 → 156.50 = 30 pips |
| XAU/USD (gold) | 0.10 | 4,050.0 → 4,053.0 = 30 pips |
| US500 | 0.1 point | 5,400.0 → 5,410.0 = 100 points |
What a pip is worth
Pip value depends on your position size. The simple version for a USD-quoted pair: pip value = pip size × units traded. One standard lot of EUR/USD is 100,000 units, so 0.0001 × 100,000 = $10 per pip.
| Position size | Units | Pip value (EUR/USD) |
|---|---|---|
| 1.00 lot (standard) | 100,000 | $10.00 |
| 0.10 lot (mini) | 10,000 | $1.00 |
| 0.01 lot (micro) | 1,000 | $0.10 |
Why this matters
Pips measure distance; pip value turns that distance into money. You cannot size a trade safely until you can convert 'my stop is 40 pips away' into 'that costs me $X'.
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