What is a pip? A plain-language guide

If you have watched a trading video, you have heard someone say "the price moved 30 pips". A pip is simply the unit traders use to measure how far a currency pair has moved.

The basic rule

For most pairs, such as EUR/USD or GBP/USD, a pip is the fourth decimal place: 0.0001. If EUR/USD moves from 1.0850 to 1.0880, it has moved 30 pips.

Pairs that include the Japanese yen are the exception. For USD/JPY a pip is the second decimal place: 0.01. A move from 150.20 to 150.50 is 30 pips.

Many brokers show one extra digit after the pip, sometimes called a pipette. Ignore it when you are starting out.

What a pip is worth in money

The value of one pip depends on how big your trade is. Trade size is measured in lots:

• A standard lot is 100,000 units of the base currency.
• A mini lot is 10,000 units.
• A micro lot is 1,000 units.

On EUR/USD, one pip is worth roughly 10 US dollars on a standard lot, 1 dollar on a mini lot and 10 cents on a micro lot. Check your broker's platform for the exact figure, because it changes with exchange rates and account currency.

Why beginners should care

Pips are how you plan risk. If your stop loss is 25 pips away and you trade one mini lot, you are risking about 25 dollars. If you trade a standard lot with the same stop, you are risking about 250 dollars on the same idea.

The chart does not change. Only your position size does. That is why we spend a whole section of the course on sizing trades before we touch strategy.

Trading involves risk. This article is education, not financial advice.