Why a pip differs between pairs
A pip is a convention tied to how many decimals a pair is quoted with, not a single universal number. Most pairs are quoted to four decimals, making a pip 0.0001, while yen pairs are quoted to two, making it 0.01. Many platforms show one extra digit (five or three) called a pipette, which is a tenth of a pip rather than a whole one.
Confusing a pip with a pipette is the most common arithmetic error when reading a spread or setting a stop. Details in reading a currency pair.
What a pip is worth
Pip value is a property of your position size as much as of the pair. On a dollar-quoted pair a standard lot is worth $10 per pip, a mini lot (0.1) one dollar, and a micro lot (0.01) ten cents. When the quote currency is not the dollar — EUR/GBP, say — the pip is denominated in pounds and its dollar value shifts with the exchange rate.
The formula
Pip value = contract size × the value of one pip movement
A worked example
On EUR/USD with a standard lot (€100,000), a pip of 0.0001 is worth $10. Entering at 1.1000 and exiting at 1.1025 is a 25-pip gain, or $250. At 0.1 lots the same move earns $25. Compute any pair with the pip value calculator.
Common mistakes with this term
- Confusing a pip with a pipette (the fifth digit), reading a 1.5-pip spread as 15 pips.
- Assuming a pip is always $10, when it changes with size and with the quote currency.
- Comparing profits across instruments in pips without converting to money.