Trading knowledge libraryWhat Is a PipMarket Basics
Market Basics
What Is a Pip
A pip is the smallest step most traders count in: the second digit from the right-hand end of any quoted price. This paper shows you how to find it on any symbol your broker offers — currency pairs, the yen, gold — what one pip is worth at each size, how a real day's move in pips becomes money, and how to tell a pip from a point and a tick.
Almost everything you will read about trading is written in pips. The spread is 0.9 pips. The price moved 60 pips. None of it means anything until you can find the pip on the symbol in front of you, and that is a positional rule that does not care what you are looking at. The pip is the second digit from the right-hand end of the quoted price. On the euro against the dollar that lands on the fourth decimal. On anything containing the Japanese yen it lands on the second. On gold, quoted to two decimals, it lands on the second as well. Count back two from the end and you have it every time.
The same word on four instruments
A pip is defined by the shape of the quote, not by how much the instrument moves, so the same word is a different size on different symbols. On the euro and the pound it is 0.0001. On the yen pairs it is 0.01, because they are quoted to two decimals. On gold it is one cent. And what a pip is worth to an account holding one lot follows from that: ten dollars on a pair priced in dollars, about six dollars on a yen pair, and one dollar on gold, where a lot is a hundred ounces and a pip is a cent on each.
