# What Are Pips and How to Calculate Them

> Pips are the standard unit of measurement in forex trading. Here is exactly what a pip is, how to calculate its value, and why it matters for your trading.

**Tags:** pips, pip-calculation, forex-basics, beginners
**URL:** https://traderjournal.app/forex-basics/what-are-pips-and-how-to-calculate-them

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# What Are Pips and How to Calculate Them

A pip (percentage in point) is the standard unit for measuring price movement in forex. It is the smallest incremental price change for most currency pairs. Understanding pips is fundamental to calculating profit/loss, position sizing, and risk management.

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## What Is a Pip

For most currency pairs, one pip equals a movement of 0.0001 in the exchange rate (the fourth decimal place).

EUR/USD moves from 1.0850 to 1.0860 - that is a 10-pip movement upward.

For pairs involving Japanese Yen (USDJPY, EURJPY), one pip equals 0.01 (the second decimal place), because the Yen is quoted to fewer decimal places.

USD/JPY moves from 150.20 to 150.35 - that is a 15-pip movement.

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## What Is a Pipette

Many modern brokers quote prices to 5 decimal places (or 3 for JPY pairs) rather than 4. The fifth decimal place is called a pipette (or fractional pip) and equals 0.1 pips.

EUR/USD: 1.08504 - the "4" at the end is a pipette.

When your broker shows prices to 5 decimal places, a 1-unit move in the last digit is 0.1 pips, not 1 pip.

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## How to Calculate Pip Value

Pip value tells you how much money each pip of movement is worth for a specific lot size. This is what converts pips into dollars.

**For pairs where USD is the quote currency (EUR/USD, GBP/USD, AUD/USD):**

Pip value = 0.0001 x Lot size in units

For a standard lot (100,000 units): 0.0001 x 100,000 = $10 per pip
For a mini lot (10,000 units, = 0.10 lots): 0.0001 x 10,000 = $1 per pip
For a micro lot (1,000 units, = 0.01 lots): 0.0001 x 1,000 = $0.10 per pip

**For pairs where USD is the base currency (USD/JPY, USD/CHF, USD/CAD):**

Pip value must be converted from the quote currency to USD.

For USD/JPY at 150.00:
Pip value in JPY = 0.01 x 100,000 = 1,000 JPY per pip
Pip value in USD = 1,000 / 150.00 = $6.67 per pip per standard lot

**For cross pairs (EUR/JPY, GBP/JPY):**

Requires converting through both currencies. Use a pip value calculator rather than manual calculation.

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## A Quick Reference

| Pair Type | Pip = | Value per pip (standard lot, USD account) |
|---|---|---|
| EUR/USD, GBP/USD, AUD/USD | 0.0001 | $10.00 |
| USD/JPY (at 150) | 0.01 | ~$6.67 |
| USD/CHF (at 0.90) | 0.0001 | ~$11.11 |
| GBP/JPY (at 195, GBP/USD at 1.27) | 0.01 | ~$6.51 |

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## Why Pip Values Matter

Pip values are directly used in position size calculation. If you know you want to risk $100 on a trade with a 30-pip stop on EUR/USD:

Position size = $100 / (30 pips x $10 per pip) = 0.33 lots

Track your pip-level performance alongside dollar performance in Trader Journal at android.traderjournal.app or ios.traderjournal.app.