Definition

A pip (Point in Percentage) is the measurement of the change in value between two currencies being traded. It is normally measured in terms of the currency being quoted or the underlying currency.

Pips are standardized units and they are the smallest amount by which a currency quote can change. They are the last decimal place of a quotation.

Majority of the currency pairs have 4 decimal places in their quotes except for the Japanese Yen pairs which only have 2 decimal place.

Example

EUR/USD moves from 1.5687 to 1.5688.

There is a movement of 0.0001 resulting in “7″ increasing to “8” which is a movement of one pip.

EUR/JPY mover from 1.67 to 1.68 is a movement of 0.01 which is also one pip

What is a Pipette?

Sometimes you will come across quotes which have 5 decimal places rather than the conventional 4 and 2 decimal places.

There are called “fractional pips” which are termed as “Pipettes.”

Example

If you have a quote for EUR/USD 1.67893 and it moves to 1.67894, there has been a movement of 0.00001 which is one pipette