Pips and Points

In currency trading (forex), "pips" and "points" are used to measure the smallest price movements of a currency pair.

Pips (Percentage In Point)

A pip is the smallest standard unit of price movement in a currency pair. For most currency pairs, a pip is the fourth decimal place (0.0001). However, for Japanese Yen (JPY) pairs, a pip is the second decimal place (0.01).

Example:

If the EUR/USD exchange rate moves from 1.12340 to 1.12350, it has moved up by 1 pip. (The last decimal place is often a "fractional pip" or "pipette" and is ignored when discussing standard pips).

Points

"Points" are a more general term and can sometimes be used interchangeably with pips, especially in some trading contexts. However, more often, "points" refer to the fifth decimal place in a currency pair (0.00001), also known as a "pipette" or "fractional pip." This allows for more precise quoting of prices.

Example:

If the EUR/USD exchange rate moves from 1.12345 to 1.12348, it has moved up by 3 points (or 3 pipettes). If it moves from 1.12345 to 1.12355, it has moved up by 1 pip or 10 points.

Summary Table