Short answer: A pip is the standard unit of price movement in forex: the fourth decimal place for most pairs (0.0001) and the second for yen pairs (0.01). On one standard lot of a pair quoted in US dollars, like EUR/USD, one pip is worth $10.
Pip value by position size
| Position | Units | Value of 1 pip on EUR/USD |
|---|---|---|
| Standard lot | 100,000 | $10 |
| Mini lot | 10,000 | $1 |
| Micro lot | 1,000 | $0.10 |
For pairs where the US dollar isn’t the second currency, like EUR/GBP or USD/JPY, the pip value is in that second currency and changes slightly with the exchange rate. Most platforms show it for you.
A quick example
You buy one mini lot of EUR/USD at 1.0850 and sell at 1.0880. That’s 30 pips. At $1 a pip, you made $30. If it had gone to 1.0820 instead, you’d have lost $30.
Pips vs points
Many brokers quote prices to a fifth decimal place (1.08503). That extra digit is a “pipette” or point, a tenth of a pip. A spread shown as “12 points” is 1.2 pips.
Why pips matter when choosing a broker
Spreads are quoted in pips, so a broker with a 1.2 pip spread on EUR/USD charges you about $12 per standard lot each time you trade. See how to compare broker costs.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Most retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
