What is a pip? Pips, points and pip value

A pip is the unit traders use to measure how far a price has moved. When someone says "EUR/USD moved 40 pips today" or "my stop is 25 pips away", this is the yardstick they mean.

How big is a pip?

For most currency pairs, a pip is the fourth decimal place:

EUR/USD from 1.0850 to 1.0851 = 1 pip (0.0001)

For pairs that include the Japanese yen, it's the second decimal place:

USD/JPY from 150.25 to 150.26 = 1 pip (0.01)

Pips vs. pipettes (points)

Most brokers quote one more decimal than the pip: EUR/USD at 1.08505. That last digit is a pipette, a tenth of a pip. MetaTrader calls it a point:

1 pip = 10 points on a 5-digit quote

This trips up a lot of beginners. If you set a stop "20 points" away in MetaTrader, that's only 2 pips. Always check which unit a tool or a signal is using.

What is a pip worth?

It depends on your lot size:

On pairs where the US dollar is the second currency (EUR/USD, GBP/USD, AUD/USD), a pip on 1 lot is always $10. On other pairs the value changes with the exchange rate. MetaTrader converts it to your account currency for you, and our free calculator-style cheat sheet shows the maths.

Gold, indices and oil don't use pips the same way

Traders often say "pips" for everything, but outside forex it's clearer to talk in price:

• Gold: a move from 2,650.00 to 2,651.00 is a $1 move. On 1 lot (100 oz) that's $100.
• Indices: US30 from 42,000 to 42,001 is 1 point.

Some people call a $0.10 move in gold "one pip", others call $0.01 a pip. Because there's no single standard, size gold trades in dollars of price movement, not in pips.

Putting it together

To know how much a trade can lose:

Risk = Lots × Stop distance in pips × Value of 1 pip per lot

Example: 0.20 lot on GBP/USD, stop 25 pips away: 0.20 × 25 × $10 = $50 at risk.

Now flip it around to choose your size from your risk: the 1% rule, step by step. And if you're not sure what a lot is yet: what is a lot?

Grab our free cheat sheet with pip and point values for gold and US30: download it.