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What is a PIP?
Welcome to the second in this short FX Education series, aimed at introducing new investors to the basic concepts of FX trading. In this edition, we describe what a PIP is.
Defining a Pip
Currencies are quoted using 5 significant digits. The last digit, called a "pip", represents the smallest potential move in an exchange rate, and is very similar to ticks or points in other financial products. In the example below, a 10 pip increase in the Ask price would result in a quote of 1.2287. Likewise, a 10 pip decrease in the Ask price would result in a quote of 1.2267. Half-pips are a more recent development offering traders even tighter spreads and more competitive and transparent accuracy in pricing. When trading foreign exchange, the value of a pip is dependent on two variables – the amount of currency and the currency pair.
USD Value of a Pip
Below, we have calculated the US Dollar value of a 1 pip movement for some of the more frequently traded currency pairs. Please note, all values are calculated using 100,000 units of the base currency (the left-hand currency in the pair).
| EURUSD | USD 10.00 |
| USDCHF | USD 8.00 |
| USDJPY | USD 9.06 |
| GBPUSD | USD 10.00 |
| USDCAD | USD 7.92 |
| AUDUSD | USD 10.00 |
| EURCHF | USD 8.00 |
| EURJPY | USD 9.06 |
| EURGBP | USD 17.98 |