Definition of Pip

What is the definition of the term "pip" as it applies to forex trading?

First off, "pip" stands for "percentage in point".

A "pip" is the smallest unit of price for any currency.

For most currency pairs, a pip is 0.0001.

Let's look at the EURUSD.

The bid is currently 1.4090, while the ask is 1.4094. This would mean that there is a 4 "pip" spread between the bid and the ask.

If you bought EURUSD at 1.4094 and sold at 1.4098, then you would have made 4 "pips" on your trade.

Most currencies have a pip of 0.0001.

One exception to the rule is the USDJPY, which has a pip of 0.01.

Pips are sometimes also referred to by traders as "points".


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