If you trade forex, you will hear the word “pip” constantly — it is how profit, loss, spreads and risk are all measured. The good news: it is simple once you see it. This guide explains what a pip is, how to work out its value, and why it matters, with clear examples.
What is a pip?
A pip (“percentage in point”) is the smallest standard price move in a currency pair. For most pairs it is the 4th decimal place, or 0.0001.
For example, if EUR/USD moves from 1.0800 to 1.0801, that is a 1-pip move. From 1.0800 to 1.0850 is a 50-pip move.
Pips vs pipettes
Most modern brokers, including SCapitalFX, quote an extra decimal (the 5th) for more precision. That smaller unit is a pipette (one-tenth of a pip). So a price of 1.08005 shows 1.0800 (pips) plus a 5 (pipettes). When traders talk about moves and spreads, they almost always mean pips.
What about JPY pairs?
For pairs that include the Japanese yen (like USD/JPY), a pip is the 2nd decimal place (0.01) instead of the 4th, because the yen is quoted differently. So USD/JPY moving from 150.00 to 150.01 is a 1-pip move.
How much is a pip worth?
A pip’s cash value depends on your trade size (lot). For pairs quoted in US dollars, the standard values are:
| Lot size | Units | Value of 1 pip |
|---|---|---|
| Standard lot (1.0) | 100,000 | $10 |
| Mini lot (0.1) | 10,000 | $1 |
| Micro lot (0.01) | 1,000 | $0.10 |
So if you buy 1 mini lot of EUR/USD and it rises 20 pips, that is 20 × $1 = +$20. The same 20-pip move on a micro lot is just $2 — which is why beginners start with micro lots.
Why pips matter
- Profit and loss are counted in pips.
- The spread (your main trading cost) is measured in pips — see what is the spread.
- Risk management works in pips: your stop-loss distance in pips, times your pip value, equals your money at risk.
At SCapitalFX, EUR/USD spreads start from just 1.0 pip on a Standard account and 0.0 pips on a Raw account — so you keep more of every pip you make. Compare them in Standard vs Raw.
Risk warning: Trading forex on margin carries a high level of risk and may not be suitable for everyone. You could lose some or all of your invested capital.
Frequently asked questions
What is a pip in simple terms?
It is the smallest standard price move in a currency pair — usually the 4th decimal place (0.0001) — and it is how profit and loss are measured.
How much is 1 pip worth?
About $10 per standard lot, $1 per mini lot, and $0.10 per micro lot for US-dollar-quoted pairs.
What is the difference between a pip and a pipette?
A pipette is one-tenth of a pip (the 5th decimal). Brokers show it for extra pricing precision.
How many pips is a good daily target?
There is no fixed number — focus on a positive risk-to-reward ratio (for example risking 20 pips to make 40) rather than chasing a pip count.
Put it into practice
Open an account or a free demo and watch pips add up in real time. New here? Start with our forex for beginners guide.