If you’re new to forex trading, understanding what a pip is will help you track price changes and manage your trades effectively. A pip, short for "percentage in point," represents the smallest price move a currency pair can make. In most currency pairs, a pip equals a movement in the fourth decimal place. For example, if EUR/USD moves from 1.1050 to 1.1051, that’s a one pip increase.
Why Pips Matter
Pips allow traders to quantify price movements and calculate profits or losses. Knowing the value of a pip is essential to understanding how much money you gain or lose with each price change.
How Pip Value is Calculated
The pip value depends on your trade size, also known as the lot size, and the currency pair you’re trading. For a standard lot of 100,000 units, one pip is usually worth $10. Smaller lot sizes, like mini (10,000 units) or micro lots (1,000 units), correspond to pip values of $1 and $0.10 respectively. This allows traders to control risk based on the size of their trades.
What is a Pipette?
Some brokers quote prices with an extra decimal place, called a pipette, which is one-tenth of a pip. This added precision can benefit traders by offering tighter spreads and more exact price tracking.
Conclusion
Understanding pips is fundamental to forex trading. It helps you measure market moves, manage risk, and calculate your trading results. At Axiory, we provide tools and support to help you track pips clearly and trade confidently.