What is a pip

What is a Pip in Forex?

In the world of Forex trading, a pip—short for percentage in point—is the smallest standard unit by which a currency pair’s price can change.

For most major currency pairs, a pip typically refers to a movement of 0.0001 in price. So if the EUR/USD pair shifts from 1.1000 to 1.1001, that’s a one-pip change.

Understanding pips is essential because they form the foundation for calculating your profit or loss in any trade.

Whether you’re scalping or holding long-term positions, pip movements help quantify the value of your strategy, allowing you to track performance and risk accurately.

Did You Know?
For pairs involving the Japanese yen, like USD/JPY, one pip is equal to 0.01 due to their lower decimal placement.

Calculating pip value and position size

As mentioned, a pip is equivalent to a change of 1 point in fourth decimal in the exchange rate of the . Keeping that in mind here is how we calculate a pip move as well as price moves in :

Calculating forex price moves

Now that we are clear on what a pip is let’s see how much money we can gain or lose for each movement.

The size of your position will influence this, with the same price movement in pips, larger positions will have greater monetary consequences on your balance.

This can be calculated very simply: Positions size   x    0.0001   =     Monetary value of a pip

Here is a quick example using the EUR/USD as we have above:

We open a position size of 10,000 units and calculate the pip value as follows: 10,000 (units) x 0.0001 (one pip) = $1 per pip.

When you open a position of BUY and the market acts in your favor every pip movement will earn you $1.00 and the visa versa is true if you SELL. If the markets are against your choice to either buy or sell, a $1.00 will be lost per pip movement should the trend be against you.

Increasing or decreasing the amount of units will have the exact effect on the pip value. You can also use our  in order to estimate the possible outcome of a trade before entering it.

Pip Value Comparison Across Lot Sizes and Currency Pairs

Understanding how much a pip is worth depends on two main factors: the currency pair you’re trading and the lot size you’re using.

Below is a comparison table that illustrates pip values across different combinations. This can help traders estimate potential gains or losses before placing a trade.

*Pip values can slightly vary depending on the exchange rate. For example, for USD/JPY at 131.40, a pip in a standard lot equals approximately $9.13.

Tip: For exotic pairs or cross-currency trades, pip values may differ even more significantly.

Why This Matters to Traders

Knowing the pip value:

• Helps determine your risk per trade
• Assists in setting accurate stop-loss and take-profit levels
• Ensures you’re aligning lot size with your risk tolerance

Major currencies pips

Pip values vary per currency as they are dependent on how the currency is traded. On some trading platforms even though rare, it is possible to record a price move in half-pip increments, therefore the value of one pip is commonly a standard on most interfaces. However, it depends on the  and the price feed, there are systems that show 4 digits (pips) and those that show 5 (pipettes).

The major currencies that are traded by investors / traders are the Japanese Yen (JPY), Great British Pound (GBP), US Dollar (USD), Euro (EUR) and the Canadian Dollar (CAD). These major currencies can be paired with each other or other more exotic currencies.

It is important to keep abreast of  daily average ranges when , in order to gauge . Should the pairs not meet estimated ranges then you will not be hitting your profits and lower targets need to be set up.

Monitoring your ADR (Average Daily Ranges) closely is highly recommended by AvaTrade.

Here is an example of the major pairs price movements in pips on average per trading session:

Using Pips to Improve Your Trading Strategy

Beyond just measuring price changes, pips can become a core part of your trading decision-making process.

Understanding how to use pip-based insights allows you to refine your entries, exits, and overall risk-reward profile.

Pip-Based Strategy Tips

1. Define Risk with Stop-Losses – Decide how many pips you’re willing to risk per trade. For example, a 20-pip stop-loss on EUR/USD with a standard lot equals a $200 risk. Tailor lot size to keep this in line with your account risk tolerance (usually 1–2%).
2. Set Measurable Targets – A realistic profit target might be 3x your stop-loss in pips. For instance, risking 20 pips with a 60-pip target creates a 3:1 risk-reward ratio.
3. Avoid Emotional Decisions – Use fixed pip-based rules rather than gut feeling. This promotes consistency and discipline, two hallmarks of successful trading.
4. Backtest with Pip Metrics – Analyse historical trades by tracking average pip gain/loss per trade. This reveals whether your strategy works over time.