Pips in Forex Trading
So, what is a pip, then? Pip stands for “percentage in point.” Sometimes you may hear people refer to pips as points for matters of Forex trading, and it is the smallest unit of price for a currency being traded. It appears in the place of the last decimal point in exchange rates and currency pairs. When dealing with most currencies, it is 0.0001. This means that if you bought USD/CHF 1.3475 and sold at 1.3489, you made 14 pips on that trade.
In this currency pair USD/JPY, there are only two decimal places, making it an exception to the rule above. In this case, a pip is equal to 0.01. Regardless of their precise value, pips are critical to Forex trading since they are used to measure all profits and losses on the foreign market.
Here is an information video on pips that will help you to understand them even better:
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