Pip

In forex, a pip is a standard unit for measuring how much a currency pair has moved. For most pairs, a pip is a change of 0.0001 in the quoted price, so if EUR/USD rises from 1.1050 to 1.1051, that is a one-pip move. Pairs that include the Japanese yen use two decimal places for pips, so a move in USD/JPY from 110.25 to 110.26 is also one pip. Quotes usually show extra decimal places: the fourth decimal place (or second on yen pairs) is one pip, while the next digit is a fractional pip, often called a pipette. Pips allow traders to compare price changes across different pairs using one common scale. Profit, loss, spreads and many risk parameters are all expressed in pips and then converted into the account currency. For Australian traders, this same definition applies across platforms and account types.

Forex quotes include several decimal places because exchange rates change in very small steps. The pip acts as a standard step size that simplifies measuring and discussing these moves.

• For most major pairs like EUR/USD, GBP/USD and AUD/USD, prices are typically shown to five decimal places. The fourth decimal is one pip, and the fifth decimal is a pipette, equal to one-tenth of a pip.
• For yen pairs such as EUR/JPY or GBP/JPY, prices are usually shown to three decimal places. The second decimal is one pip, and the third decimal is a fractional pip.

Using pips rather than raw price changes makes it easier to compare volatility and potential trade setups between, for example, EUR/USD and AUD/JPY, even though their price levels differ.

The cash value of a pip depends on the currency pair, the trade size, and the relevant exchange rate. One standard lot usually represents 100,000 units of the base currency.

For pairs where the US dollar is the quote currency (second in the pair), pip values are straightforward:

• Standard lot (100,000 units) in EUR/USD: 1 pip ≈ 10 USD
• Mini lot (10,000 units): 1 pip ≈ 1 USD
• Micro lot (1,000 units): 1 pip ≈ 0.10 USD

Flexible lot sizes allow a trader to adjust pip value to match individual risk tolerance.

When the US dollar is the base currency, such as in USD/CAD, the pip value changes with the exchange rate. For example, at 1.2500 in USD/CAD, a one-pip move on a standard lot is roughly 8 Canadian dollars, which at that rate is about 6.40 US dollars. Trading platforms typically carry out these conversions automatically and show pip value in the account currency, including Australian dollars for AUD accounts.

Typical Pip Values by Lot Size