What a pip means

"Pip" is short for percentage in point. Traders use pips instead of raw prices because it makes moves easy to compare across pairs.

  • For EUR/USD, GBP/USD and most pairs, one pip is the fourth decimal place: 0.0001.
  • For pairs quoted in Japanese yen (such as USD/JPY), one pip is the second decimal place: 0.01.

Many brokers show one extra digit, called a pipette (a tenth of a pip). If EUR/USD is quoted as 1.08503, the final "3" is pipettes.

Why pips matter

Your profit or loss on a trade is the number of pips the price moved, multiplied by the value of one pip for your position size. The pip value depends on how many lots you trade and on your account currency, which is why a position size calculator is useful.

The risk to understand

A move of 20 pips sounds small. With a large position, 20 pips can be a large amount of money. Always know what one pip is worth before you open a trade.