What is a pip?

A ‘pip’ (point in percentage) is the smallest standard increment in which a currency pair can move. For almost all pairs, a pip is the fourth digit after the decimal point. A popular exception is the Japanese yen, where a pip is a change in the second digit after the decimal point.

This is an example of how pair quotes are displayed, and the pip for each pair is highlighted:
EUR/USD = 1.13422
GBP/CAD = 1.71791
USD/JPY = 110.771

A ‘point’ in FX represents a fraction of a pip and nowadays most brokers quote each pair to an extra digit after the pip.

10points = 1pip

This means that the very last digit of a currency quote is a point, making price quotes much more accurate and allowing for fractional spreads and trade calculations.

For example, a spread may be 1.4pips (the equivalent of 14points).

Remember we are discussing FX here; For other assets such as Indices, the term ‘base point’ or ‘index point’ is used to refer to 1 whole monetary value. For example, if the FTSE 100 index is currently priced at 7664.95, the last digit before the decimal is the ‘Index Point’ and is equal to £1.

Please check the specific asset specifications in the FxPro website for more details.

The monetary value of each pip (and therefore ‘point’) is determined by the currency pair and the trade size you place.

Why is this so important? Your profit or loss is calculated by multiplying the number of pips that the price went in “your direction” or “against you” by the specific pip value.

To calculate Pip Value for FX, you can use the formula:
Pip in decimal places X Trade size in units = Pip value in ‘term’ currency
Pip in decimal places X Trade size in units / exchange rate = Pip value in ‘base’ currency

Let’s look at a few examples.

‘Pip in decimal places’ specifies which digit is the pip, so for most pairs, this is 0.0001 (a pip is the 4th digit after the decimal). In this case, 1lot is always equal to 10 of the term currency, since 0.0001 X 100,000 = 10

For pairs where the pip is quoted to the 2nd decimal (for example JPY pairs), 1lot will be equal to 1000jpy, since 0.01 X 100,000 = 1000

The table below will help you to understand how pip value is determined, based on trade size & pair:

Information regarding pip value can be found on the FxPro website in the “Specifications” section, as well as our useful online Pip Calculator tool.

In FX, a ‘Tick’ represents a single price change, regardless of how many points the price moved. Price changes don’t necessarily occur point by point. For example, if the price of EUR/USD jumps from 1.10564 to 1.10567, this is a one tick movement, even though the price jumped by 3points.

For other asset groups such as Futures and Commodities, a ‘tick’ represents the smallest possible price movement and is used to calculate overall PnL.

Please check the specific asset specifications in the FxPro website for more details.

• Pips, points and ticks are all used to describe price changes in markets
• In FX, a Pip is usually the 4th digit after the decimal point (for JPY pairs it is the 2nd)
• A point represents a fraction of a pip and is the last digit quoted in a pair
• Spread and PnL is calculated my multiplying pip value by the number of pips
• Pip value for 1lot is equal to 10 of the ‘term’ currency (for 4-digit pairs)
• Points and Ticks are used differently for other asset groups