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Pip

The pip is the smallest unit of change in which a currency pair can move. In the Forex trading, currencies are traded in fractions of a Cent, or Euro, and so on. Nearly all currency pairs consist of five significant digits and most pairs have the decimal point immediately after the first digit, with four decimal points to follow.

For example, EUR/ USD equals 1.3377. In this example, a single pip equals the smallest change in the fourth decimal place – that is, 0.0001. Therefore, if the quote currency in any pair is USD, then one pip always equals 1/100 of a cent. The only notable exception to this rule is the USD/JPY pair where a pip equals $0.01.

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