What Is a Pip? The Simplest Explanation Ever

What Is a Pip? The Simplest Explanation Ever

If you’re new to Forex trading, you’ve probably seen traders say things like:

• “That trade made 25 pips”
• “My stop loss is 15 pips”
• “EUR/USD moved 60 pips today”

And you’re thinking:

“Okay… but what is a pip?”

Don’t worry—this is one of the easiest trading concepts once you see it clearly.

In this guide, we’ll explain what a pip is, show real examples, and explain how pips affect profit/loss without overcomplicating anything.

Want to practice this live? Start with a demo account:
Open a Demo Account on ZenithFX

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What Is a Pip? (Simple Definition)

A pip is the standard unit used to measure price movement in Forex.

For most currency pairs:

✅ 1 pip = 0.0001

That means if a price moves by 0.0001, it moved 1 pip.

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Pip Example (EUR/USD)

Let’s say EUR/USD moves from:

1.1000 → 1.1001

That move is:

✅ 1 pip

If it moves from:

1.1000 → 1.1015

That move is:

✅ 15 pips

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Why Do Traders Use Pips?

Because pips help traders measure movement in a clean, universal way.

Instead of saying:

“EUR/USD moved 0.0025”

Traders say:

“EUR/USD moved 25 pips.”

It’s faster, easier, and standard across Forex trading.

Explore Forex markets: Trade Forex on ZenithFX

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What About JPY Pairs? (USD/JPY Is Different)

JPY pairs are quoted differently because the Japanese yen has fewer decimal places.

For most JPY pairs:

✅ 1 pip = 0.01

Pip Example (USD/JPY)

If USD/JPY moves from:

150.20 → 150.21

That move is:

✅ 1 pip

If it moves from:

150.20 → 150.70

That move is:

✅ 50 pips

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What Is a Pipette? (The Tiny Extra Digit)

On many platforms, you’ll see an extra digit added to the price.

Example:

EUR/USD = 1.10005

That last digit is called a pipette.

✅ 1 pipette = 0.1 pip

So:

• 10 pipettes = 1 pip
• 5 pipettes = 0.5 pip

💡 You don’t need to overthink pipettes. Most traders focus on full pips.

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How Do Pips Affect Profit and Loss?

Pips measure movement. Your profit or loss depends on:

• how many pips the market moves
• your position size (lot size)

Simple Example

Let’s say you buy EUR/USD and price moves up 20 pips.

If your position size is small, the profit is small.
If your position size is large, the profit is larger.

✅ Same pip move… different results based on your lot size.

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What Is Pip Value? (Beginner Explanation)

Pip value is how much money you make or lose per pip.

It depends on:

• your position size
• the currency pair
• your account currency

Instead of calculating it manually, many traders use a pip value calculator (or their platform tools).

Best practice: Use small sizing until you fully understand how pip value works.

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How Many Pips Should Your Stop Loss Be?

This is one of the most common beginner questions.

The real answer is:

Your stop loss should be based on the chart structure—not a random pip number.

That said, beginners often do better with stops that are not extremely tight, because tight stops get hit easily in normal market noise.

✅ A better beginner rule:

• Place stop loss beyond a recent swing high/low
• Risk the same amount per trade every time
• Avoid moving your stop loss emotionally

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How to Use Pips the Right Way (Beginner Tips)

✅ Tip #1: Focus on process, not pip bragging

Some traders chase “big pip days” and take reckless trades.

Better goal: take clean setups with controlled risk.

✅ Tip #2: Don’t compare pip results across different pairs

50 pips on one pair doesn’t always equal the same money on another.

✅ Tip #3: Track pips AND risk-reward

A trade that makes 10 pips can be great if your stop was 5 pips (2:1).
A trade that makes 30 pips can be bad if your stop was 50 pips.

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Quick Pip Cheat Sheet

• Pip = small unit of price movement in Forex
• Most pairs: 1 pip = 0.0001
• JPY pairs: 1 pip = 0.01
• Pipettes = 0.1 pip
• Profit/Loss depends on pips + your position size

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Practice Pips on a Demo Account

The best way to learn pips is to practice in a demo account and watch how price moves in real time.

✅ Open a Demo Account on ZenithFX

Try this simple practice drill:

1. Open EUR/USD chart
2. Watch price move for 5 minutes
3. Count how many pips it moves up/down
4. Repeat on USD/JPY and compare

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Risk Disclaimer

Risk Warning: Forex and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Ensure you understand how CFDs work and whether you can afford to take the high risk of losing your money.