What exactly is PIP?

A pip (percentage in point) is a unit used to measure the smallest price movement in the exchange rate of a currency pair in forex trading. It represents a change in the fourth decimal place of most currency pairs, although exceptions exist (e.g., for pairs involving the Japanese yen).

How Pips Work:

1. Most Currency Pairs:
   • One pip equals a movement in the fourth decimal place (e.g., EUR/USD moving from 1.1050 to 1.1051 is a 1-pip change).
2. Japanese Yen Pairs:
   • For currency pairs involving the yen (e.g., USD/JPY), one pip equals a movement in the second decimal place (e.g., USD/JPY moving from 110.00 to 110.01 is a 1-pip change).

Pipettes (Fractional Pips):

Some brokers quote forex prices to an additional decimal place, called a pipette:

• 1 pip = 10 pipettes.
• For example, if EUR/USD moves from 1.10501 to 1.10502, it has moved 0.1 pip (1 pipette).