Pip
The standard smallest price increment in a currency pair — usually 0.0001.
Also called: pips · percentage in point · pipette
In plain language
For most pairs a pip is the fourth decimal place. EUR/USD moving from 1.0850 to 1.0851 is a one-pip move.
Yen pairs are the main exception. Because they are quoted to two decimals, a pip there is 0.01.
Many brokers quote a fifth decimal, called a pipette or fractional pip, which is a tenth of a pip. It is easy to misread a quote by a factor of ten.
Why it matters
Pips are the unit your stop distance is measured in, and stop distance is what your position size is calculated from. Getting the pip definition wrong scales the entire trade incorrectly.
Common mistakes
- Applying the 0.0001 pip definition to yen pairs.
- Confusing pipettes with pips and sizing ten times too large.
Keep exploring
These concepts are connected. Understanding one usually makes the next one easier.
How much one pip of movement is worth in your account currency, given your position size.
The standardized unit of trade size in forex.
Two currencies quoted against each other, showing how much of one buys the other.
The gap between your entry and your stop loss — your risk on a single unit.
The amount of an asset you buy or sell in a single trade.