Pips are one of the most basic ideas in Forex trading.
They help traders understand how much price moves, whether the movement is big or small.
Once you understand pips, everything else in Forex becomes much easier.
What Is a Pip?
A pip is a standard unit used to measure price movement in the Forex market.
You can think of price movement like walking:
- A big move is a big step
- A pip is a small step
For most currency pairs:
- 1 pip = the 4th decimal place
For Japanese Yen (JPY) pairs:
- 1 pip = the 2nd decimal place
Simple examples:
- EUR/USD moves from 1.5000 to 1.5001
→ Price moved 1 pip - USD/JPY moves from 120.00 to 120.03
→ Price moved 3 pips
Why Pips Matter in Forex Trading
Pips are important because they are used to:
- Measure price movement
- Calculate profit and loss
- Set stop loss and take profit levels
Instead of guessing, traders simply count pips to see what happened in the market.
What Is a Pipette?
A pipette is a smaller unit of measurement than a pip.
- 1 pipette = 1/10 of a pip
- It is usually the last decimal number shown in a Forex price
Example:
- EUR/USD = 1.34567
→ The last digit 7 is a pipette
Pipettes allow traders to see very small price changes more clearly.
What Is Pip Value?
Pip value shows how much money is gained or lost when price moves by one pip.
This depends on:
- The currency pair
- The size of the trade
- The account currency
Simple formula:
Pip Value = (pip size) × (number of units traded)
Pips and Profit or Loss
Profit and loss are first measured in pips.
Example:
- Buy EUR/USD at 1.2000
- Sell at 1.2010
→ Profit: 10 pips - Buy EUR/USD at 1.2000
- Sell at 1.1990
→ Loss: 10 pips
After that, pip value converts those pips into real money.
Quick Summary
- Pip: measures price movement
- Pipette: a smaller part of a pip
- Pip Value: shows how much one pip is worth
- Understanding pips is a key foundation for Forex beginners
This is one of the first topics every beginner should master in the Guide to Forex 2026.
