What Is a Pip? Understanding the Smallest Price Move

A pip (“percentage in point”) is the standard unit used to measure a price change in a currency pair — it’s how traders talk about how much a market has moved.

Where the pip sits

For most currency pairs, a pip is the fourth decimal place. If EUR/USD moves from 1.0850 to 1.0851, that’s a one-pip move. For pairs involving the Japanese yen, a pip is the second decimal place instead, because the yen has a much smaller relative value.

Pips vs. pipettes

Many brokers quote prices to one extra decimal place beyond the standard pip, called a “pipette” or fractional pip. A move from 1.08501 to 1.08505 is 0.4 pips, giving more precision when spreads or price moves are very small.

Why pips matter

Pips are used to express spread size, profit and loss, and stop loss/take profit distances. A trade’s profit is typically calculated as the number of pips gained or lost multiplied by the pip value, which depends on the trade size (lot size).

Key takeaway

The pip is the common language traders use to describe price movement, regardless of which currency pair they’re trading. Understanding it is essential before you can calculate position size, risk, or potential profit.