What is a pip?

A pip is the standard unit used to measure how much a currency pair's price has changed. For most pairs one pip is 0.0001 (the fourth decimal place), while for pairs involving the Japanese yen it is 0.01 (the second decimal place).

Why pips exist

Exchange rates usually move in tiny amounts. Saying "EUR/USD rose by 0.0045" is clumsy, so traders say it rose by 45 pips instead. Pips give everyone a common language for price moves, spreads, profits and losses, whatever the size of the trade.

Counting pips

To count pips, find the difference between two prices and divide by the pip size.

The prices in the table are illustrative.

Pipettes: the extra decimal

Many platforms show one more decimal place than the pip, such as EUR/USD at 1.10753 or USD/JPY at 149.852. That last digit is a fractional pip, often called a pipette, worth one tenth of a pip. Do not mistake it for a full pip when counting, or your numbers will be ten times too large.

Pips and spreads

Spreads are normally quoted in pips too. If EUR/USD is 1.10750 bid and 1.10762 ask, the spread is 0.00012, or 1.2 pips. A trade must move at least that far in your favour before it breaks even.

Key takeaways

• A pip is 0.0001 for most pairs and 0.01 for yen pairs.
• Count pips by dividing the price difference by the pip size.
• A pipette is the extra decimal on many platforms, worth one tenth of a pip.
• Spreads, profits and losses are commonly measured in pips.