A pip is how forex traders measure price changes, spreads and stop distances. Instead of saying EUR/USD moved from 1.1000 to 1.1050, they say it moved 50 pips. Converting pips into money requires the trade size, measured in lots, and sometimes the current exchange rate.
How it’s calculated
Pip size:
- Most pairs: 0.0001 (fourth decimal), for example EUR/USD 1.1000 → 1.1001
- JPY pairs: 0.01 (second decimal), for example USD/JPY 150.00 → 150.01
- Many brokers quote an extra digit, the pipette (one tenth of a pip).
Pip value (in the quote currency) = pip size × units traded
When the account currency is the quote currency (a USD account trading EUR/USD), that is the answer: 0.0001 × 100,000 = $10 per pip on a standard lot.
When it is the base currency (a USD account trading USD/JPY), divide by the exchange rate:
Pip value (USD) = pip size × units ÷ exchange rate
Example
EUR/USD, 1 standard lot (100,000 units): price moves from 1.1000 to 1.1035, a gain of 35 pips. 35 × $10 = $350.
USD/JPY, 1 standard lot at 150.00: pip value = 0.01 × 100,000 ÷ 150.00 ≈ $6.67. A 40-pip move is worth about $267.
Sizing a trade: with a $5,000 account, risking 1% ($50) on a 25-pip stop on EUR/USD, each pip may be worth $50 ÷ 25 = $2, which is 0.2 standard lot. The pip calculator and position size calculator handle the conversions.
Common mistakes
- Mixing pips and pipettes. On a five-decimal quote, a move of 10 in the last digit is one pip, not ten.
- Assuming $10 per pip everywhere. That only holds for a standard lot when USD is the quote currency.
- Ignoring the spread in pips. A 2-pip spread on a 10-pip target eats a fifth of the reward.
- Applying forex pips to other markets. For indices, metals and crypto, “pip” or “point” definitions vary by broker; check the contract specifications.
For pair-specific context, see the EUR/USD chart analysis guide.
Educational content — not financial advice.
Updated