FOREX BASICS
Pip Definition, Value, and How to Calculate It
Understand what a pip is, how to read pip moves on MT5, how to calculate pip value across major pairs (including JPY pairs), and how pips differ from “points” and equity price ticks—plus a worked table and examples.
Forex Education
Trading Calculations
Department
OTM Academy
Category
Fundamental Analysis
What Is a Pip in Forex?
A pip (point) is the standard unit that measures the smallest significant price change in a currency pair. Historically it was the last quoted decimal, but with fractional pricing many brokers quote an extra digit. The pip stays a uniform unit traders use to discuss moves and value—removing confusion across platforms.
Formal Definition
For most pairs, 1 pip = 0.0001 of the quote.
For JPY pairs, 1 pip = 0.01 (second decimal).
Because the pip is standardised, traders can compare moves and calculate P/L precisely, independent of broker display conventions.
How to Calculate Pip Value
General idea: multiply one pip by your position size.
Example (EUR/USD, 1.00 lot = 100,000 EUR):Pip value = 100,000 × 0.0001 = 10 USD per pip.
If you bought 1.16650 and closed at 1.16660, the move is +1 pip → +$10 for 1 standard lot.
Reference table (standard lot):
Pair | Pip Size | Example Price | Contract (Base) | Pip Value |
|---|---|---|---|---|
EUR/USD | 0.0001 | 1.16671 | 100,000 EUR | 10 USD |
GBP/USD | 0.0001 | 1.31114 | 100,000 GBP | 10 USD |
USD/JPY | 0.01 | 113.553 | 100,000 USD | 1,000 JPY |
USD/CAD | 0.0001 | 1.27326 | 100,000 USD | 10 CAD |
USD/CHF | 0.0001 | 0.99543 | 100,000 USD | 10 CHF |
Worked Examples (EUR/USD & USD/JPY)
EUR/USD (standard lot):
Buy 1.16650 → Sell 1.16660 = +1 pip → +$10.
P/L scales linearly: 10 pips = $100, 100 pips = $1,000 (for 1.00 lot).
Fractional Pricing & Points
Many platforms show an extra fractional digit (e.g., 1.31190 / 1.31208 on GBP/USD).
Spread = 1.8 “points” (fractional pips) = 0.18 pip.
MT5 dropdowns labeled “points” refer to 1/10 of a pip on 5-digit quotes.
Choosing 50 points sets a level 5 pips away.
Pips, CFDs & Equities
FX/CFDs on FX: use pips (and fractional points).
Equities: already quoted in dollars/cents or pence, so pips aren’t used.
For indices/commodities/crypto CFDs, platforms typically express moves in index points/ticks—check each symbol’s spec.
