What Is a Pip in Forex?

A pip — "percentage in point" — is the standard smallest unit of price movement in a forex pair. It's the yardstick for everything: how far price moved, how much you made or lost, and how much the spread costs.

Where the pip sits in a price

For most pairs, a pip is the fourth decimal place — a move from 1.0850 to 1.0851 is one pip.

The exception is pairs that include the Japanese yen, which are quoted to two decimals — so for USD/JPY a pip is the second decimal, a move from 150.20 to 150.21.

Many brokers also show one extra digit (a fifth decimal, or third on yen pairs) called a pipette — a tenth of a pip — for finer pricing.

What a pip is worth

A pip's value in money isn't fixed — it depends on your lot size and the pair:

• Standard lot (100,000 units) — roughly $10 per pip on USD-quoted majors like EUR/USD.
• Mini lot (10,000) — about $1 per pip.
• Micro lot (1,000) — about $0.10 per pip.

So the same 20-pip move is $200 on a standard lot but $2 on a micro lot. That's why lot size is really a risk decision, not just a size one.

Why pips matter

• Profit and loss are counted in pips, then converted to money by pip value.
• The spread — your main cost — is quoted in pips, so tighter is cheaper.
• Stops and targets are set in pips, which keeps your risk consistent across pairs.

Next: the cost you pay every trade — What is the spread? — and the bigger picture in What is forex trading?.