• What is Pip in Forex?
• Where exactly is the “one pip”?
• Pips and Points
• No Concepts of Pips for CFDs
• Example of 1 pip movement

What is Pip in Forex?

Pip (percentage in point) is a unit of change in an exchange rate of a currency pair.

Most major currency pairs are priced to four decimal places, and a pip is one unit of the fourth decimal point: for dollar currencies this is to 1/100th of a cent.

A “Pip” stands for “Percentage In Point“, and is the smallest price change that a given exchange rate can make.

An increase or decrease in pips represents a profit or loss in your Forex trade.

When currency is a quoted, they are mainly quoted to the 4th decimal place.

This is also true for silver and heating oil.

Exception of pairs that includes the Japanese Yen as well as commodities such as Gold, Oil Brent and Gas which are quoted to 2 decimal places.

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Where exactly is the “one pip”?

Pip is just an unit for numbers to see how much the prices are changed.

For example, if you look at the bid and ask price of the EURGBP below, the prices are: 0.78140 and 0.78150.

The difference of the prices are one pip, and the prices changes as 0.1 pip as it is the smallest number displayed in the platform.

Another example, the prices of USDJPY are: 111.395 and 111.415.

This means that the difference of the prices are 2 pips.

So most of the brokers show the prices with 6 numbers, and the 2nd number from the right is the pip, and the 1st number from the right is the point.

Pips and Points

Some time ago, there was no pip displayed in any trading platforms, as brokers couldn’t offer that much precise prices in real time to traders.

So the Pip was the smallest price of unit change, but now the technology has been developed and most of the brokers which display 5th decimal points for currency pairs and the smallest unit of change became point.

These units are used for calculating profit/loss or margins though, if you are not familiar with it that wouldn’t necessarily bother you for understanding Forex and CFD trading.

No Concepts of Pips for CFDs

Not like the Forex currency pairs, there is a certain base currencies for CFDs and you can count the changes of prices by the currency.

So there is no concept of pips or points for CFDs, but the contract sizes and the base currencies are more important for trading CFDs.

These conditions are different each broker, and you may want to make sure that you know the required margins and contract sizes before trading it.

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Example of 1 pip movement

When we look at the EUR/USD pair and see it moved from 1.3130 to 1.3131, it has moved one pip, because the 4th decimal point has increased by 1.

A 1 pip move for the USD/JPY, we can see as 77.60 to 77.61, because the second decimal point has increased by 1.