Learning note · Pips · Basics
What is a pip, and how much is one worth?
A pip is the standard unit for measuring price moves in forex. Here is how to count pips, why yen pairs are different, and how to turn pips into money for any position size.
Forex prices move in tiny steps, so traders use a shared unit to talk about them: the pip. Once you can count pips and turn them into money, stop distances, targets and costs all become much easier to reason about.
Counting pips
For most currency pairs a pip is the fourth decimal place, 0.0001. For pairs where the Japanese yen is the quote currency, such as USD/JPY or EUR/JPY, a pip is the second decimal place, 0.01, because the yen has a much smaller value per unit.
To count pips, subtract one price from the other and divide by the pip size.
EUR/USD from 1.0850 to 1.0875: 0.0025 ÷ 0.0001 = 25 pips
USD/JPY from 150.20 to 150.45: 0.25 ÷ 0.01 = 25 pips
Pipettes and points
Many platforms show one extra decimal, such as 1.08503. That last digit is a pipette, a tenth of a pip. Some platforms use the word point for that smallest step, so a "10-point stop" may mean only 1 pip. Always check how your platform defines its units before typing a stop distance.
Turning pips into money
A pip on its own is just a distance. Its value depends on how big the position is and which currency the pair is quoted in. The basic formula is:
pip value = pip size × units traded, in the quote currency
A Standard lot is 100,000 units. On EUR/USD that gives 0.0001 × 100,000 = 10 US dollars per pip. If your account is in US dollars, that is the final answer: $10 per pip per standard lot, $1 for a mini lot (0.10) and $0.10 for a micro lot (0.01). The same applies to GBP/USD, AUD/USD and NZD/USD.
When the US dollar is the first currency, the pip value comes out in the other currency and has to be converted. For USD/JPY, 0.01 × 100,000 = 1,000 yen per pip. Divide by the current rate to get dollars:
USD/JPY at 150.00: 1,000 ÷ 150.00 = about $6.67 per pip per standard lot
Because the rate keeps moving, pip values for pairs like USD/JPY, USD/CAD and USD/CHF change slightly over time. For pairs that do not include your account currency at all, such as EUR/GBP in a USD account, the broker converts at the relevant exchange rate.
Why this matters
- It tells you what a stop loss actually costs. A 30-pip stop on 0.50 lots of EUR/USD risks 30 × $5 = $150.
- It lets you size positions. If you know the money you are prepared to lose and the stop distance, you can work back to a lot size. The position size calculator does this step for you.
- It shows the cost of the spread. A 1.2-pip spread on one standard lot of EUR/USD costs about $12 the moment you open the trade.
Common mistakes
- Mixing up pips and pipettes, which makes a stop ten times tighter or wider than intended.
- Assuming every pair is worth $10 per pip per lot. Only pairs quoted in your account currency are.
- Forgetting that a pip value is per position size: double the lots, double the pip value.
Try a few numbers in the pip calculator, then watch pip values change between pairs in the practice simulator.
Education, not advice. This note explains a concept with illustrative numbers. It is not a recommendation to trade. Currency trading carries risk, and losses can exceed expectations. See the risk disclaimer.