Two people take the same EURUSD trade and both close it 20 pips in profit. One made 200 USD, the other made 2 USD. Neither is exaggerating. The pip measured the same price movement for both of them; the money came from the size of the position, and nothing else. Getting comfortable with that separation is the first practical step in trading, because every risk rule, every stop distance and every cost you will ever pay is quoted in pips and settled in currency.
The size of a pip is set by the pair
For the great majority of currency pairs, one pip is 0.0001. EURUSD moving from 1.0840 to 1.0841 has moved one pip. GBPUSD from 1.2705 to 1.2700 has moved five pips down.
Japanese yen pairs are the exception that everyone trips over. Because the yen is quoted to two decimals, one pip on USDJPY, EURJPY or GBPJPY is 0.01. A move from 151.20 to 151.70 is 50 pips, not 5,000. The rule is easy to remember once you see why it exists: a pip is meant to be roughly the smallest meaningful increment, and one hundredth of a yen sits in about the same place as one ten thousandth of a dollar. Which currency sits on which side of the quote decides everything here, and that structure is set out in currency pairs explained.
Pipettes, and why your platform shows five decimals
Your terminal quotes EURUSD as 1.08403, with a fifth decimal. That last digit is a pipette, one tenth of a pip. Yen pairs get a third decimal for the same reason. Fractional pricing arrived when spreads compressed far enough that whole pips were too coarse to price competitively, and it lets a broker quote a spread of 0.8 pips rather than rounding to 1.
The practical consequence is that a spread quoted as "8" in your platform may be 0.8 pips in pipettes, and a stop set 200 away may be 20 pips. Read the decimal count before you read the number. This is also why the same spread can look ten times larger or smaller depending on which comparison table you are reading, a point worth keeping in mind alongside the bid ask spread.
Turning pips into money
The calculation has two steps. First, work out the pip value in the quote currency: pip size multiplied by the number of units in your position. Second, if the quote currency is not your account currency, convert.
| Position | Units | Pip size | Value of one pip |
|---|---|---|---|
| EURUSD, 1 standard lot | 100,000 | 0.0001 | 10.00 USD |
| EURUSD, 1 mini lot | 10,000 | 0.0001 | 1.00 USD |
| EURUSD, 1 micro lot | 1,000 | 0.0001 | 0.10 USD |
| USDJPY, 1 standard lot | 100,000 | 0.01 | 1,000 JPY, then converted |
| EURGBP, 1 standard lot | 100,000 | 0.0001 | 10.00 GBP, then converted |
The first three lines are the reason USD-quoted pairs feel simple: if your account is in dollars, the conversion step disappears and one pip on a standard lot is 10 dollars. The yen line shows the extra step. One pip on a standard USDJPY lot is 1,000 JPY. If the rate happens to be 150.00, that is 1,000 divided by 150, or about 6.67 USD. Move the rate and the pip value moves with it, which means the money value of your stop drifts slightly over the life of a long-held yen position.
The same is true for any cross where neither currency is your account currency. On EURGBP with a USD account, one pip is 10 GBP converted at the live GBPUSD rate. Most platforms display this for you in the order ticket, and every serious trader checks it rather than assuming. Position sizing works backwards from this number, which is why it belongs next to lots and position sizes in your head.
Where the pip convention breaks down
Gold, indices and crypto contracts are the trouble spots. There is no market-wide agreement on what one pip means for XAUUSD: some venues describe a 0.01 move as a pip, others quote in points where one point is a full dollar of gold price, and the money value depends entirely on the contract size the instrument is built with. The same applies to index CFDs, where a "point" on a US 500 contract and a point on a Germany 40 contract are different amounts of money.
For anything that is not a currency pair, stop using the word pip and go to the contract specification. Read the contract size and the tick value, then compute what a one point move costs on the position you are about to open. Assuming a gold trade behaves like a forex trade is one of the fastest ways to take a loss ten times larger than intended.
The instrument page in your platform carries these numbers. If you trade metals regularly, the sizing conventions are worth reading in full in the gold trading guide before you set a stop.
Why the unit matters for costs and risk
Almost every cost in trading is quoted in pips. The spread is a pip figure. Slippage is measured in pips. Overnight financing is often expressed as a pip adjustment per lot. Because the pip value scales linearly with position size, doubling your lots doubles the spread you pay as well as the profit you are chasing, and that symmetry is what makes high-frequency retail scalping so difficult to sustain.
Risk sizing runs on the same arithmetic in reverse. Decide the money you are willing to lose on the trade, decide where the stop belongs on the chart, measure that distance in pips, and divide. Money at risk divided by pip distance gives pip value, and pip value gives lot size. Doing it in that order means the chart decides the stop and the arithmetic decides the size. Doing it the other way round, picking a lot size first and then finding somewhere to put the stop, is the habit behind most blown accounts, and it is the reason risk management rules are written as a process rather than a preference. Leveraged trading carries a high risk of loss, and the pip is the unit in which that loss arrives.
"Nobody blows an account because they misread a pip. They blow it because they picked the lot size first and then went looking for somewhere to hide the stop."
— Alex Onta, Executive Director, SINGUARD
Key Takeaways
- One pip is 0.0001 on most pairs and 0.01 on yen pairs, and the fifth or third decimal your platform shows is a pipette worth one tenth of that.
- Pip value equals pip size times units, then converted into your account currency if the quote currency differs.
- Gold, indices and crypto contracts do not share the forex pip convention, so read the contract size and tick value instead.
- Size a position by dividing the money you accept losing by the stop distance in pips, never by choosing lots first.
Frequently Asked Questions
How much is one pip worth?
It depends on the pair and the position size. On a pair quoted to four decimals, one pip on 100,000 units is 10 units of the quote currency, on 10,000 units it is 1 unit, and on 1,000 units it is 0.1 units. That figure is then converted into your account currency if the quote currency is different.
What is the difference between a pip and a pipette?
A pipette is one tenth of a pip, shown as the fifth decimal place on most pairs and the third decimal place on yen pairs. Platforms quote pipettes so that spreads and fills can be priced more finely. A move from 1.10000 to 1.10001 is one pipette, and ten of those make one pip.
Do gold and indices use pips?
Not in a standard way. Gold, indices and crypto contracts are usually described in points or ticks, and the value of one point is set in the instrument's contract specification rather than by a market-wide convention. Always read the contract size and tick value on the instrument page before sizing a position.