When you start trading forex, gold, indices, or CFDs, you’ll constantly hear the words pips and points. They are simply units used to measure price movement — but they work a little differently depending on the market.
Let’s break this down clearly and practically, with examples you can actually use while trading.
1. What Is a Pip?
Definition
A pip (Percentage in Point) is the standard unit of price movement in most forex currency pairs.
For most pairs:
- 1 pip = 0.0001 (the 4th decimal place)
Example (EUR/USD)
- Price moves from 1.1000 → 1.1001
- That move = 1 pip
If price moves:
- 1.1000 → 1.1010 = 10 pips
2. Pip Value in Different Currency Pairs
Major Forex Pairs (EUR/USD, GBP/USD, AUD/USD)
| Price Change | Pips |
|---|---|
| 0.0001 | 1 pip |
| 0.0010 | 10 pips |
| 0.0100 | 100 pips |
JPY Pairs (USD/JPY, EUR/JPY)
JPY pairs are quoted with 2 decimal places.
- 1 pip = 0.01
Example:
- USD/JPY moves from 145.20 → 145.21
- That’s 1 pip
3. What Is a Pipette?
A pipette is a fraction of a pip.
- 1 pipette = 0.1 pip
- Appears as the 5th decimal place
Example:
- EUR/USD moves from 1.10000 → 1.10005
- That’s 0.5 pip
📌 Brokers show pipettes to give more precise pricing and tighter spreads.
4. What Is a Point?
Definition
A point is the smallest price movement an instrument can make.
In most modern trading platforms:
- 1 pip = 10 points (in forex)
Forex Example (EUR/USD)
- 1 pip = 0.0001
- 1 point = 0.00001
If price moves:
- 10 points = 1 pip
- 50 points = 5 pips
5. Pips vs Points (Quick Comparison)
| Term | Meaning | Used In |
|---|---|---|
| Pip | Standard price unit | Forex |
| Pipette | Fraction of pip | Forex |
| Point | Smallest price change | Forex, indices, gold, crypto |
6. Pips and Points in Other Markets
Gold (XAU/USD)
Gold is usually quoted with 2 decimal places.
- 0.01 = 1 point
- 0.10 = 10 points
- 1.00 = 100 points
Example:
- Gold moves from 2000.50 → 2001.50
- Movement = 1.00 = 100 points
Some brokers refer to:
- 10 points = 1 pip (gold)
⚠️ Always check your broker’s contract specifications.
Indices (US30, NAS100, DAX)
- 1 index unit = 1 point
Example:
- NAS100 moves from 15000 → 15010
- Movement = 10 points
No pips here — only points.
Crypto (BTC, ETH)
- Measured in points or price units
- No fixed pip system
Example:
- BTC moves from 40,000 → 40,100
- Movement = 100 points
7. Why Pips and Points Matter
Understanding pips and points helps you:
✅ Calculate profit & loss
✅ Set accurate stop-loss & take-profit
✅ Understand spreads & commissions
✅ Control risk properly
8. Pip Value (Money Impact)
Forex Example (EUR/USD)
- 1 standard lot = $10 per pip
- 0.10 lot = $1 per pip
- 0.01 lot = $0.10 per pip
So if:
- You trade 0.10 lot
- Market moves 20 pips
- Profit/Loss = $20
9. Common Beginner Mistakes 🚫
❌ Confusing pips with points
❌ Not checking broker decimal format
❌ Miscalculating stop-loss distance
❌ Ignoring pip value before entering trades
10. Simple Rule to Remember 🧠
Pips measure movement.
Points measure precision.
Profit comes from understanding both.
