What Are Pips In Forex ? Ultimate Guide

Every trader’s mind faces these questions at some point of trading career – ‘What are Pips in Forex?’, ‘what is a pip’? Words like Pips, Points, Pipettes, are so commonly used in trading.

As a trader, you must know the meaning and calculations behind these terms. Our suggestion is, don’t even start trading without knowing what are pips in forex.

Already Confused? Don’t worry! We will make this as easy as possible for you, just read with concentration and you will be an expert in answering the question – What are pips in forex ?

 

What are Pips in FOREX?

Everything measurable in this world has a unit of measurement, similarly, A pip or pips are nothing but a unit of measuring the change in value or price between two currency pairs.

The full form of a Pip is – “Percentage in Point” or “price interest point”

Now that you know the definition of a pip, Let’s try to understand it thoroughly and make you a ‘Pip-Genius’

Let’s Consider EUR/USD, the most traded pair in the world.

Assume the price of EURUSD is 1.1070. if the price rises to 1.1071, then that 0.0001 rise is called 1 Pip.

POINT to be NOTED : Observe that EUR/USD has 4 decimal places, but most of the forex pairs will have more than 4. Japanese Yen pairs have 2 decimal places.

Don’t get confused, your forex broker will have everything you need.

Now, Let’s see more examples to understand better but first you need to know what is a Pipette.

 

What is a ‘Pipette’ ?

In simple words, A pipette is nothing but one tenth of a pip.

1/10 of a Pip = A pipette. (Don’t get confused, things will be clear as you read on)

A pipette is also called with the names – ‘point’, ‘fractional pip’

As mentioned earlier, some forex pairs go beyond 4 decimal places, one such pair is GBP/USD which has 5 decimal places. Let’s understand pips in GBP/USD

Suppose the value of GBP/USD is 1.34590

if the value moves up to 1.34591 then, that 0.00001 rise is called a ‘1 pipette’ or

‘1 point’ or ‘1 fractional pip’

if the value changes to 1.34600 then, that 0.0001 raise is called ‘1 pip’

Remember, these things get easier and easier as you gain experience as a forex trader, but at least you should understand what are pips in forex.

Now, Let’s take the example of GBP/JPY, this is a Japanese yen pair, hence has 2 decimal points. some brokers have 3 decimal points, the 3rd decimal becomes the fractional pip.

Assume the value of GBP/JPY is 153.50

if the price changes to 153.51, then this 0.01 raise is called a pip.

Hope these examples are clear, if not, read them again and you will be able to answer the question ‘what are pips in forex’

Here is ‘Pip chart’ to summarize everything we learned about pips.

what are pips in forex - pip chart

 

Now, you must be wondering whether you need to remember by heart all this about pips, NO, NO, NO. but it is always good to know so that you can calculate your expected profit or loss.

remember, each pip has a trading value, it is different for different forex pairs, but guess what? you don’t need to know the pip trading value, because your broker automatically calculates it for you!

by now, you know what are pips in forex, so what are you waiting for? go ‘pip-hunting’

If you are looking for free forex signals, then do not forget to join our telegram channel!

JOIN TELEGRAM CHANNEL

 

THE Bottom line

Pips are nothing but unit of measuring change in prices of a trading instrument. Point or pipette or fractional pip is one tenth of a pip. It is not mandatory to know these terminologies, but what is the point in being a trader not knowing what are pips in forex?

 

Also Checkout: Most powerful Candlestick Patterns

Please follow and like us:
error0
fb-share-icon0
Tweet 20
fb-share-icon20

Leave a Comment

error

Like our work? Please spread the word :)