A pip is a unit of measurement in trading to express the change in value between two currencies.
If the EUR/USD moves from 1.1050 to 1.1051, that .0001 USD rise in value is ONE PIP.
A PIP is what defines your profit or loss, the value of the pip is determined by the 'volume' or contract size you opened.
Example on EUR/USD:
Lot Size | Volume | PIP Value |
0.01 | 1,000 | $0.10 |
0.10 | 10,000 | $1.00 |
1.00 | 100,000 | $10.00 |
A pip is usually the last decimal place of a price quote.
Most FX pairs go out to 4 decimal places, but there are some exceptions such as the Japanese Yen pairs (these go out to two decimal places).
For example, for EUR/USD, it is 0.0001, and for USD/JPY, it is 0.01.
Important to note - the higher your lot size the more your profit, but your losses are also greater!
