Market StructurePrice Interest Point
Pip
The standard smallest conventional price increment in a currency pair - the fourth decimal place, or the second on yen pairs.
What Pip means
A pip is the conventional unit of price movement in forex. On most pairs it is the fourth decimal place, so a move from 1.0850 to 1.0851 is one pip. On pairs quoted against the Japanese yen the convention shifts two decimal places, and a pip is the second decimal, so 152.40 to 152.41 is one pip. Traders use pips to express spreads, stop distances, targets and results in a way that is comparable across pairs.
Pip value depends on position size and on the quote currency. For a standard lot of 100,000 units on a pair quoted in US dollars, one pip is worth 10 US dollars, a mini lot 1 dollar and a micro lot 10 cents. When the quote currency is not the dollar, the pip value floats and must be converted, so it changes as the exchange rate moves. Note also that gold, indices and other CFDs use points, not pips, with their own contract specifications.
Worked example
A 25 pip stop on two standard lots of GBP/USD risks 25 times 10 US dollars times two, or 500 US dollars, before spread and commission.
Related terms
- PipetteOne tenth of a pip - the fifth decimal place on most pairs and the third on yen pairs.
- Standard LotA position of 100,000 units of the base currency, the benchmark trade size in forex.
- Quote CurrencyThe second currency in a pair - the one the exchange rate is expressed in and in which profit and loss accrue.
- SpreadThe difference between the bid and the ask price, and the most common way a forex broker is paid.
- Position SizingThe process of choosing how many lots to trade so that a losing trade costs a predetermined amount of capital.
Frequently asked questions
What does Pip mean in forex trading?
The standard smallest conventional price increment in a currency pair - the fourth decimal place, or the second on yen pairs.
How does Pip work in practice?
Pip value depends on position size and on the quote currency. For a standard lot of 100,000 units on a pair quoted in US dollars, one pip is worth 10 US dollars, a mini lot 1 dollar and a micro lot 10 cents. When the quote currency is not the dollar, the pip value floats and must be converted, so it changes as the exchange rate moves. Note also that gold, indices and other CFDs use points, not pips, with their own contract specifications.
What is an example of Pip?
A 25 pip stop on two standard lots of GBP/USD risks 25 times 10 US dollars times two, or 500 US dollars, before spread and commission.
Trade with a regulated broker
Understanding the terminology is the cheap part. The expensive part is choosing a counterparty whose execution, financing and withdrawal behaviour match what the marketing implies. Every broker below has been reviewed with a funded live account, and each review states which legal entity and which regulator applies to the account you would actually open.
Check the licence on the regulator's own register before you deposit — our regulators directory explains what each authority enforces, from leverage caps to compensation limits.