What is a pip? How to calculate pip value, with examples

Currency prices move in tiny increments, so traders count those moves in pips rather than in cents or fractions of a cent. Once you know what a pip is worth on your position, you can work out profit, loss and risk before you place a trade.

What a pip is

For most currency pairs a pip is the fourth decimal place: 0.0001. If EUR/USD moves from 1.1500 to 1.1501, it has moved one pip.

Pairs that include the Japanese yen are quoted with fewer decimals, so for them a pip is the second decimal place: 0.01. If USD/JPY moves from 150.00 to 150.01, that is one pip.

Most brokers now quote one extra decimal. That fifth digit on EUR/USD, or third digit on USD/JPY, is a pipette, worth one tenth of a pip. A spread shown as 0.6 means six tenths of a pip.

How much one pip is worth

The value of a pip depends on three things: the size of your position, the pair, and the currency your account is held in.

When the US dollar is the second currency (EUR/USD, GBP/USD, AUD/USD) and your account is in dollars, the calculation is simple:

• 1 standard lot (100,000 units): $10 per pip
• 1 mini lot (10,000 units): $1 per pip
• 1 micro lot (1,000 units): $0.10 per pip

When the yen is the second currency, a pip on one standard lot is worth ¥1,000. To express that in dollars, divide by the exchange rate. With USD/JPY at 150.00, one pip is worth about $6.67 per standard lot. The dollar value changes as the exchange rate moves.

On a cross such as EUR/GBP, a pip on one standard lot is worth £10. If your account is in dollars and GBP/USD is 1.35, that is $13.50 per pip.

A worked example

You buy 0.5 lots of EUR/USD at 1.1500 and close the trade at 1.1530.

1. The price moved 30 pips in your favour.
2. Half a standard lot is worth $5 per pip.
3. Profit before costs: 30 × $5 = $150.

Had the price fallen 30 pips instead, the loss would have been the same $150, plus the spread and any commission.

Gold is different

Gold (XAU/USD) is usually quoted to two decimal places, and brokers don't agree on what a "pip" means for it. Contract sizes also vary: many brokers set one lot at 100 troy ounces, which makes a $1 move in the gold price worth $100 per lot, but not all do. Always check the contract specifications on your broker's platform before trading metals.

Why pip value matters more than pip count

A 20-pip stop-loss sounds small, but on two standard lots of EUR/USD it risks $400. Traders who size positions properly start from the amount they are willing to lose, then work backwards to the position size. Position sizing walks through that calculation step by step.