Forex course · Section 1: Forex Basics: How the Currency Market Works
What Is a Pip? Pips, Pipettes, Lots and Pip Value Explained
A pip is 0.0001 in most pairs and 0.01 in yen pairs. Learn lots and how to calculate pip value for EUR/USD, USD/JPY and cross pairs.
Beginner5 min read·7:02 video·Lesson 4 of 26·quiz: 5 questions
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On this page +
- Pip size
- Lot sizes
- The pip value formula
- Case 1: USD is the quote currency (EUR/USD, GBP/USD, AUD/USD, NZD/USD)
- Case 2: USD is the base currency (USD/JPY, USD/CHF, USD/CAD)
- Case 3: no USD in the pair (crosses)
- Quick reference for a US dollar account
- Turning pips into profit, loss and risk
- Accounts in other currencies
A pip is the standard unit for measuring a change in a forex price: 0.0001 for most currency pairs (the fourth decimal) and 0.01 for pairs quoted in Japanese yen (the second decimal). How much a pip is worth in money depends on your position size, measured in lots: one standard lot is 100,000 units of the base currency. For a US dollar account, one standard lot of EUR/USD is worth 10 dollars per pip, a mini lot 1 dollar and a micro lot 10 cents.
Pip size
"Pip" is short for "percentage in point" or "price interest point"; both names are used. What matters is the size:
| Pair type | Example quote | One pip | One pipette |
|---|---|---|---|
| Most pairs | EUR/USD 1.10250 | 0.0001 | 0.00001 |
| Yen pairs | USD/JPY 150.255 | 0.01 | 0.001 |
Most brokers show one extra decimal, called a pipette or fractional pip. In EUR/USD 1.10250 the final 0 is the pipette digit. So a move from 1.10250 to 1.10257 is 0.7 pips, not 7.
Example
EUR/USD rises from 1.10250 to 1.10910. The change is 0.00660, which is 66 pips. USD/JPY falls from 151.40 to 150.65. The change is 0.75, which is 75 pips.
Gold, silver, oil, indices and crypto do not have a universal pip convention; each broker defines its own "point". Always check the contract specification before trading anything that is not a currency pair.
Lot sizes
Position size in forex is measured in lots of the base currency (the first one in the pair):
| Lot | Units of base currency | Platform size |
|---|---|---|
| Standard lot | 100,000 | 1.00 |
| Mini lot | 10,000 | 0.10 |
| Micro lot | 1,000 | 0.01 |
| Nano lot (some brokers only) | 100 | 0.001 |
So 1 standard lot of EUR/USD is 100,000 euros, and 0.25 lots of GBP/USD is 25,000 pounds. Most retail platforms let you trade in steps of 0.01 lots (one micro lot). That step size matters a lot when you size positions for small accounts, as you will see in Position Sizing.
The pip value formula
The money value of one pip comes straight from the definition:
Pip value (in the quote currency) = pip size × number of units
Then convert it to your account currency if it is different. There are three cases for a US dollar account.
Case 1: USD is the quote currency (EUR/USD, GBP/USD, AUD/USD, NZD/USD)
The pip value is already in dollars, and it never changes with the price.
Example
1 standard lot of EUR/USD: 0.0001 × 100,000 = 10 US dollars per pip. A 0.10 lot is 1 dollar per pip, a 0.01 lot is 10 cents per pip. If you buy 0.10 lots at 1.10250 and sell at 1.10910 (66 pips), you make 66 × 1 = 66 dollars before costs.
Case 2: USD is the base currency (USD/JPY, USD/CHF, USD/CAD)
The pip value comes out in the quote currency, so divide by the current price to turn it into dollars.
Example
1 standard lot of USD/JPY at 150.00: 0.01 × 100,000 = 1,000 yen per pip. In dollars: 1,000 / 150.00 = 6.67 US dollars per pip. If USD/JPY were at 140.00, the same pip would be worth 1,000 / 140 = 7.14 dollars.
Example
1 standard lot of USD/CAD at 1.3700: 0.0001 × 100,000 = 10 Canadian dollars per pip, which is 10 / 1.3700 = 7.30 US dollars per pip.
Case 3: no USD in the pair (crosses)
The pip value comes out in the quote currency. Convert it using that currency's rate against the dollar.
Example
1 standard lot of EUR/GBP. A pip is 0.0001 × 100,000 = 10 pounds. If GBP/USD is 1.3000, 10 pounds = 10 × 1.3000 = 13.00 US dollars per pip.
Example
1 standard lot of EUR/JPY. A pip is 0.01 × 100,000 = 1,000 yen. With USD/JPY at 150.00, that is 1,000 / 150 = 6.67 US dollars per pip, the same as USD/JPY, because both are quoted in yen.
These examples use illustrative prices. Your platform shows the exact pip value at today's rates, usually in the contract specification or the order window.
Quick reference for a US dollar account
| Pair (example price) | Per pip, 1 lot | Per pip, 0.10 lot | Per pip, 0.01 lot |
|---|---|---|---|
| EUR/USD (any price) | 10.00 | 1.00 | 0.10 |
| USD/JPY at 150.00 | 6.67 | 0.67 | 0.07 |
| USD/CAD at 1.3700 | 7.30 | 0.73 | 0.07 |
| EUR/GBP with GBP/USD 1.3000 | 13.00 | 1.30 | 0.13 |
Turning pips into profit, loss and risk
Once you know the pip value, any trade is simple arithmetic:
Profit or loss = pips gained or lost × pip value
Example
You sell 0.20 lots of USD/JPY at 150.00 with a stop-loss at 150.60 (60 pips). Pip value at 150.00 is about 0.20 × 6.67 = 1.33 dollars. If the stop is hit, you lose about 60 × 1.33 = 80 dollars, plus the spread. Note that you are short dollars here, so a rise in USD/JPY is a loss for you.
Risk
Beginners often think "a 50-pip move is small". On 1 standard lot of EUR/USD it is 500 dollars. On a 1,000-dollar account that is half your money from one ordinary daily move. Always convert pips into money before you trade.
Accounts in other currencies
If your account is in euros, pounds or another currency, the same steps apply: work out the pip value in the quote currency, then convert it into your account currency at the current rate. Most Pakistani traders who use foreign brokers open US dollar accounts, which is why this course uses dollars in its examples.
Tip
Make a small table like the one above for the pairs you trade, and update it weekly. You will use pip values every time you set a stop and size a position. See them in action in Position Sizing, and check current prices for all 28 major pairs on the forex market page.
Key takeaways
- A pip is 0.0001 for most pairs and 0.01 for pairs quoted in Japanese yen; a pipette is one tenth of a pip.
- A standard lot is 100,000 units of the base currency, a mini lot 10,000 and a micro lot 1,000.
- Pip value = pip size × position size, in the quote currency; convert it into your account currency.
- For a US dollar account, one standard lot of EUR/USD is worth 10 dollars per pip; USD/JPY and crosses vary with the exchange rate.
Quiz: check what you learned
0/5 answeredAnswer every question to finish the lesson. Wrong answers are fine: read the explanation and try again.
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