If you have spent any time around trading, people have said "pips" at you as though you were born knowing what it means. It is simpler than it sounds, and it is the first number that actually connects a chart to your money.
The short answer
A pip is the standard unit for measuring how far a currency price has moved. When a trader says "GBP/USD moved 50 pips today", they are describing the size of the move in a way every other trader instantly understands — in the same way a builder talks in millimetres.
On most currency pairs, a pip is the fourth decimal place of the price.
| Pair | From | To | Move |
|---|---|---|---|
| EUR/USD | 1.0850 | 1.0851 | 1 pip |
| GBP/USD | 1.2640 | 1.2690 | 50 pips |
| AUD/USD | 0.6600 | 0.6580 | 20 pips |
The yen exception
Pairs that include the Japanese yen are quoted with fewer decimals, so on those a pip is the second decimal place:
- USD/JPY moving from 148.20 to 148.21 is 1 pip.
- GBP/JPY moving from 190.00 to 190.50 is 50 pips.
If a yen pair looks like it has moved thousands of pips in a day, you are almost certainly counting the wrong decimal.
What about that extra digit?
Most brokers now quote one more decimal than the pip — EUR/USD at 1.08503, for example. That last digit is a pipette, one tenth of a pip. It exists for pricing precision. When you measure a trade or set a stop loss, think in pips and ignore the pipette.
Gold, indices and futures
Pips are a forex idea. Indices and futures move in points or ticks instead — the Nasdaq-100 future, for example, moves in 0.25-point ticks. Gold is quoted differently from broker to broker, so check the contract specification on your own platform before assuming what "a pip" means there. The concept is identical: a standard unit of price movement. Only the name and size change.
Why the definition is the least important part
Knowing what a pip is becomes useful the moment you connect it to what a pip is worth — and that depends entirely on your position size.
| Position size | Units | Approx. value per pip (pairs quoted in USD) |
|---|---|---|
| Standard lot (1.00) | 100,000 | ~$10 |
| Mini lot (0.10) | 10,000 | ~$1 |
| Micro lot (0.01) | 1,000 | ~$0.10 |
A 50-pip move on one mini lot is roughly $50 — in either direction. If your account is in pounds, that figure is converted at the current exchange rate, so it comes out somewhat less than £50.
This is the point most beginners skip. "How many pips can I make?" is the wrong first question. The right one is: how many pips am I risking, and what is each one worth at this size? That question has an exact answer, and it is the whole basis of position sizing.
Key takeaways
- A pip is the fourth decimal on most pairs and the second on yen pairs.
- The fifth decimal your broker shows is a pipette — a tenth of a pip.
- Indices and futures use points and ticks; gold varies by broker.
- A pip only matters once you know what it is worth at your position size.
Go further: Lesson 1.4 in the free Trovia Academy — Pips, Position Sizing & Risk Per Trade — takes this straight into the formula that decides how big every trade should be. It is free with an account. For analysis and breakdowns as they happen, join the free public channel at t.me/troviatrading.
Educational content only — not financial advice. Trading carries a high risk of loss.