What you'll learn
- Locate the pip in any price
- Convert a price move into pips
- Understand that a pip has a money value that depends on position size
Finding the pip
| Pair type | Example price | One pip is |
|---|---|---|
| Most pairs | EUR/USD 1.1000 | 0.0001, the fourth decimal |
| Yen pairs | USD/JPY 150.00 | 0.01, the second decimal |
| Some brokers on gold | XAU/USD 2,350.00 | 0.10 or 0.01, so check the platform |
Counting a move
Subtract the two prices and count in the pip unit. EUR/USD from 1.1000 to 1.1080 is 80 pips. GBP/USD from 1.2650 to 1.2500 is 150 pips. USD/JPY from 150.00 to 151.20 is 120 pips. It is worth practising until it is automatic, because stops, targets and spreads are all quoted in pips and you will convert constantly.
What a pip is worth
A pip is a distance, not an amount of money. Its value depends on how big your position is and on the quote currency. On one standard lot of EUR/USD, 100,000 euros, a pip is worth 10 dollars. On a mini lot of 10,000 it is one dollar, and on a micro lot of 1,000 it is ten cents. For pairs where the dollar is not the quote currency, the value has to be converted, which the pip value calculator does for you and Course 5 explains in full.
Why it matters
Once you can express any move as pips and any pip as money, you can size a trade properly: a 30-pip stop on a position where a pip is worth 3 dollars risks 90 dollars, and you can decide whether that is acceptable before you place the trade. That calculation is the foundation of risk management.
Key takeaways
- A pip is the fourth decimal on most pairs and the second on yen pairs.
- Moves, spreads, stops and targets are all measured in pips.
- A pip's money value depends on position size and the quote currency.
Knowledge check
Trading forex, CFDs and other leveraged products carries a high risk of losing money. This lesson is general education, not advice. Risk disclosure.