Published November 1, 2026 · Beginner education
THE IDEA, IN PLAIN LANGUAGE
A pip is a conventional small unit of price movement. For many pairs it is 0.0001; for many yen pairs it is 0.01. Brokers may display additional fractional digits. The money value of a pip depends on the pair, position size and account currency.
KEY VOCABULARY
- Pip
- A conventional unit of exchange-rate movement.
A PRACTICAL EXAMPLE
A move from 1.0800 to 1.0805 in EUR/USD is five pips. It does not tell you the dollar profit without a position size and costs.
A COMMON MISTAKE
Assuming one pip always has the same cash value.
WHAT TO REMEMBER
Separate the distance price moves from the amount of money at risk.
SOURCE REFERENCES
Use these external resources to study further. Explanations here are our own; external resources may change.
- BabyPips: related source lesson ↗
- BabyPips: School of Pipsology — beginner forex curriculum ↗
- CFTC: understand forex risks ↗
RELATED VIDEOS
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