When I first started learning about Forex trading, I didn't know the word “pip”. It kept popping up everywhere — and honestly, I had no clue what it meant. I kept seeing things like (50 pips profit) or (tight pip spread), and I thought, Okay, this must be important. So I decided to dig into it and finally understand it for myself.
What I Found Out
A pip stands for "percentage in points", and it’s basically the smallest change in price that a currency pair can move. For most major currency pairs, that change happens at the fourth decimal place. So for example, if the EUR or USD goes from 1.1000 to 1.1001, that’s exactly one pip.
I also learned that not all currency pairs are the same. Like when trading in Japanese yen — e.g., "USD/JPY" — a pip is counted at the second decimal place instead of the fourth. That was something I would never have guessed until I read more into it.
Why Pips Actually Matter
Once I understood what a pip was, I realized that it’s how traders measure profit and loss. If the "EUR/USD" moves up 50 pips and I had a trade in that direction, that’s a 50 pip profit.
But how much money is that? That would depend on the lot size I’m trading with. Here's what I picked up:
- Standard lot (100,000 units) = about $10 per pip
- Mini lot (10,000 units) = about $1 per pip
- Micro lot (1,000 units) = about $0.10 per pip
It’s kind of straightforward once you see it like that.
Then I Started Learning About Fractional Pips
Some brokers go a step further and quote fractional pips — also called pipettes — which show prices to five decimal places (e.g., 1.10007). That fifth digit is a fraction of a pip. Super easy if you remember to count after the point, and it's very useful to know for fast-moving markets.
What Helped Me Learn About These Pips and How They Function
To really get my head around it, I spent time reading on a few reliable websites:
- BabyPips – Pips and Pipettes – Great beginner-friendly guides.
- Investopedia – What Is a Pip? – Helpful for definitions and examples.
- DailyFX – Forex Education – I liked how they explained real trading situations and gave examples.
These sites made it easier for me to understand what a pip is, and why it matters when actually using them for trading.
Final Thoughts (As a Beginner to Another)
I used to think Forex was all complicated and hard to understand, but learning what a pip is was actually one of the simplest and most useful first steps. I'm very happy I had the courage to learn about something I thought was hard and difficult.
If you’re just getting into knowing what a pip is and how it works — like I am — I recommend starting small and taking your time to learn the basics. Try to understand it as much as you can, and remember: don’t be afraid to learn something new.
Once you know how pips work, you’ll start to notice how they come up in every chart, strategy, or news update. It’s like learning inches before measuring wood — you can’t build anything solid without it.
