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

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.

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

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

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

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.

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.

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.

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

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.

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

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:

Open EUR/USD chart

Watch price move for 5 minutes

Count how many pips it moves up/down

Repeat on USD/JPY and compare

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.