What Is a Pip?

A pip is a standard unit used to measure price movement in many Forex pairs.

For most major currency pairs, one pip is generally the fourth decimal place.

Example:

GBP/USD:

1.2500 → 1.2501

This is a movement of 1 pip.

Another example:

1.2500 → 1.2550

This is 50 pips.

JPY Pairs

JPY pairs are commonly quoted to two decimal places.

Example:

USD/JPY:

150.20 → 150.30

This represents a movement of 10 pips.

Why Are Pips Important?

Pips help traders measure:

• Entry distance
• Stop-loss distance
• Take-profit distance
• Price movement
• Potential profit/loss

Important

A pip doesn’t automatically equal a fixed amount of money.

The monetary value depends on things such as:

• Position size
• Currency pair
• Account currency

This is why two trades moving the same number of pips can make different amounts of money.

Key Takeaways

• A pip measures price movement.
• Most major pairs use the fourth decimal place.
• JPY pairs generally use the second decimal place.
• Pip value depends on position size and instrument.