Pip
Also known as: Percentage in Point, Price Interest Point
A pip is the smallest standard price movement in the foreign exchange market.
Plain-English Meaning
Think of a pip as a "point" in forex. Just like stocks move in cents, currency pairs move in pips. For most currency pairs, a pip is the fourth decimal place. If EUR/USD moves from 1.1050 to 1.1051, that is a one-pip movement.
Why It Matters
Pips are the universal language for measuring profit, loss, and risk in forex. Instead of saying you made $50, you might say you made 50 pips. This standardizes performance regardless of the position size.
Simple Example
If you buy GBP/USD at 1.2500 and the price goes up to 1.2520, the price has moved 20 pips in your favor.
This educational example uses selected assumptions for reference calculation purposes. Real conditions may vary by broker, exchange, or instrument.
Beginner Mistake
Confusing pips with pipettes (the fifth decimal place used by modern brokers). A pipette is 1/10th of a pip.