What is a Pip?

Most currency pairs are priced out to four decimal places and a single pip is in the last (fourth) decimal place. A pip is equivalent to 1/100 of 1% or one basis point.

• A pip stands for ‘percentage in points’.
• A pip is the smallest price change that a market can make.
• The pip size changes across most markets. For example, most currencies are priced to four decimal places, meaning that a 0.0001 move in the market is referred to as a 1 pip move. However, 1 pip in the USD/JPY is the equivalent to a move in price of 0.01.
• You can determine how much you gain or lose per pip using lot size to set the volume of your trade.
• When traders refer to the movement of a particular market, they talk of its movement in pips. For example, the GBP/USD rallied 150 pips today.
• Pips are sometimes also called ticks, mostly in relation to forex.

Real-World Examples of Pip

If you’d like to know the exact size of a pip on the market you’re interested in, you can visit our Instrument Specification page and look at the ‘Size of one PIP’ column.

As seen above, a pip on the AUDCAD market is the fourth digit after the decimal, whilst a pip on the AUDJPY market is the second digit after the decimal. XTB also provides traders with more accuracy regarding the price of an asset by adding an additional digit. While this adds to the accuracy of pricing, it does not change the fact that the current size of one pip remains the same.

As an example, the EURUSD is quoted at a bid price of 1.09952. The pip is the fourth digit after the decimal point, which in this case is the number 5. If the ask price was quoted at 1.09964 and you were interested in calculating the spread on this market, you would simply need to subtract 1.09952 from 1.09964. In this case the spread would be 1.2 pips.

How Do I Know the Value of a Pip?

Understanding the pip value is vital to any trader - after all, it’s key to understanding the value of your position and for calculating how much profit or loss you stand to make if the market moves a certain number of pips after the trade is opened. The pip value depends on your chosen market, as well as on the volume you’ve selected for your position.

When using the MT4 platform, you are required to calculate the value of a pip manually. However, one of xStation’s most popular functionalities is providing this value in the in-built calculator depending on the transaction volume and the chosen market. In the example below, a 1 lot transaction on the EURUSD gives a pip value of £7.62.

What this means is that if the market moved 10 pips in your favour, you would generate a profit of £76.20 (7.62 x 10). At the same time, however, if the market moved against you by 10 pips, then you would generate a loss of £76.20 (7.62 x 10). It is very important to know the pip value before opening a transaction on the market to fully understand the size of the potential profit or loss.