What Is a Pip?
A Pip (Percentage in Point) is a standardized unit of measure used in trading to express the change in value between two currencies. For most major forex pairs, a pip is the fourth decimal place (0.0001). For JPY pairs and certain other assets, it is the second decimal place (0.01).
Why Does Pip Value Change?
The monetary value of a pip depends on three factors:
- The Instrument: The specific quote currency (e.g., the USD in EUR/USD) dictates the native currency of the pip.
- Position Size: A larger lot size amplifies the monetary value of a single pip.
- Exchange Rates: If your account currency differs from the quote currency, floating exchange rates will cause the pip value in your account to fluctuate over time.
Lot Sizes Explained
| Lot Type | Volume | Approx. Value per Pip (EUR/USD) |
|---|---|---|
| Standard Lot (1.00) | 100,000 units | $10.00 |
| Mini Lot (0.10) | 10,000 units | $1.00 |
| Micro Lot (0.01) | 1,000 units | $0.10 |