Pip

A pip (Percentage in Point) is the standard unit for measuring price changes in forex. For most currency pairs, one pip equals a change in the fourth decimal place — 0.0001. If EUR/USD moves from 1.0850 to 1.0851, that's a one-pip move. For Japanese yen pairs, a pip is the second decimal place (0.01), so USD/JPY moving from 149.50 to 149.51 is also one pip.

Pips give traders a universal language for discussing price movements, regardless of which pair they're trading. "I made 50 pips today" makes immediate sense to any forex trader. The actual dollar value of those 50 pips depends on the lot size and the specific pair, but the pip count itself is the common metric.

On a standard lot (100,000 units), one pip on EUR/USD is worth approximately $10. On a mini lot, it's about $1, and on a micro lot, roughly $0.10. Knowing these values is essential for calculating risk. If your stop loss is 30 pips and you're trading mini lots, you're risking about $30 on that trade. Simple math, but it's the foundation of position sizing.