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Home » Forex Glossary » Whatis a PIP?

Whatis a PIP?

More than just a famous Dickens character, a pip is the smallest increment of price in the forex market. It is 1/100th of 1%.It is the fourth decimal place out for all major currencies, except the yen..

For example, lets say GBP/USD rises from 1.9202 to 1.9207. You'd say, “the pound has risen five pips against the dollar.”

The Japanese yen is different because a single yen is quite a worthless sum of money. It would be like if we called our currency “the Penny” instead of the dollar. So, a pip for the yen is just the hundredth decimal place. So, if USD/JPY rises from 110.10 to 110.20, it has increased ten pips in value.

Pips are used in the forex market because the market is so liquid, and the volume that traders deal in are often so large that a change of a hundredth of a cent can make a substantial difference in profit.