Back to: Introduction to Forex
Pips and Pipettes
In this section a little math is required to calculate your profit or loss. You’ve probably heard of the terms “pips”, “pipettes”, and “lots” thrown around, and here we’re going to explain what they are and show you how they are calculated. Take your time with this information, as it is required knowledge for all forex traders. Don’t even think of attempting about trading until you are comfortable with pip values and calculating profit and loss.
- What the heck is a Pip? What about a Pipette?
The unit of measurement to express the change in value between two currencies is called a “Pip”. If EUR/USD moves from 1.2250 to 1.2251, that equals ONE PIP. A pip is the last decimal place of a quotation, given that four decimal places are used for pairs without the Japanese yen. If a pair does include the Japanese yen, then the currency quote goes out two decimal places.
- Very Important: There are brokers that quote currency pairs beyond the standard “4 and 2” decimal places to “5 and 3” decimal places. They are quoting FRACTIONAL PIPS, also called pipettes. For instance, if GBP/USD moves from 1.51542 to 1.51543, it moved ONE PIPETTE.