Pip
a.k.a. Percentage in point, Price interest point
The standard unit of price movement in forex: 0.0001 for most pairs and 0.01 for pairs quoted in Japanese yen.
A pip (short for percentage in point) is how forex traders measure a move. When EUR/USD goes from 1.0850 to 1.0851, it has moved one pip. For yen pairs the pip sits two places after the decimal, so USD/JPY moving from 150.20 to 150.21 is one pip.
One pip sounds like nothing. Then you remember that money moves in bulk. On a standard lot of EUR/USD, a single pip is worth about 10 dollars. A 50-pip lurch is 500 dollars, up or down, in a market that can do that before lunch.
How much a pip is worth to you depends on your lot size and the quote currency. Learn that number before you place a trade, not after.
Counting pips and money
- You buy EUR/USD at 1.0850 and it rises to 1.0875.
- That is 1.0875 − 1.0850 = 0.0025, which is 25 pips.
- On a standard lot (about $10 a pip): 25 × $10 = $250.
- On a mini lot (about $1 a pip): 25 × $1 = $25.
Bottom line: Same move, same pips: $250 or $25 depending on how big you went.
Counting pips without knowing what one pip is worth on your position. Fifty pips can be 5 dollars or 500 dollars.
Keep this word for good
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