Lesson 6: What is a PIP in Forex?
PIP stands for Percentage In Point.
A PIP is the unit of measurement to express the change in value between two currencies.
The standard quote is to the 4th decimal place.
In this example you will see that the 9 is located in the 4th decimal place and is the PIP. Example: 1.1209
The exception to the rule is the Japanese Yen (JPY).
The Japanese Yen is quoted to the 2nd decimal place.
In this example you will see that the 5 is located in the 2nd decimal place and is the PIP.
The value of the quoted currency moves up or down in these small increments called PIPs.
Here’s an example where we lose two pips and another where we gain 3 pips.
Have you ever heard of fractional pips or pipettes? This is a tenth of a PIP and allows you to take advantage of smaller price increments and moves in the market.
The standard fractional pip is quoted to the 5th decimal and the Japanese Yen fractional pip is quoted to the 3rd decimal.