Pips and Pip Values Explained
A pip measures a change in a currency pair’s exchange rate. Pip value tells you what that movement is worth for your position. For most forex pairs, one pip is 0.0001; for common pairs quoted in Japanese yen, it is 0.01. These conventions are described in IG’s explanation of pips and pip value.
The distinction matters in forex trading: knowing that a trade moved 20 pips does not tell you how much money it made or lost. You also need the position size and, sometimes, a currency conversion.
All exchange rates below are hypothetical. Dollar amounts mean US dollars unless stated otherwise.
What Is a Pip in Forex?
A pip is a standard unit for expressing price movement, rather than a cash amount. On EUR/USD, a rise from 1.0850 to 1.0851 is one pip. A rise from 1.0850 to 1.0900 is 50 pips. The same counting convention applies to pairs such as GBP/USD, AUD/USD and USD/CAD, as illustrated in IG’s currency pair examples.
Keep the order of the currencies straight. In EUR/USD, EUR is the base currency and USD is the quote currency. A rate of 1.0850 means one euro costs 1.0850 dollars. Position size is expressed in units of the base currency; the initial pip value calculation produces an amount in the quote currency. Our guide to forex currency pairs covers this notation.
Japanese Yen Pairs
For pairs such as USD/JPY and EUR/JPY, one pip is normally 0.01. A move from 150.20 to 150.21 is one pip, while 150.20 to 150.70 is 50 pips. Using 0.0001 here would give the wrong answer by a factor of 100.
Pips Versus Pipettes
A pipette is one tenth of a pip. OANDA’s guide to pips and fractional pricing explains that this extra precision gives EUR/USD five decimal places and yen pairs three.
On EUR/USD, a move from 1.08500 to 1.08501 is one pipette, or 0.1 pip. A move from 1.08500 to 1.08510 is one full pip. On USD/JPY, 150.200 to 150.201 is one pipette.
The final digit on your screen is therefore not necessarily the pip digit. Count by the pair’s pip size, not by how many numbers appear after the decimal point.
How to Calculate a Price Move in Pips
To measure the distance between two prices, take their absolute difference and divide it by the pip size:
Pip distance = absolute price difference ÷ pip size
Suppose EUR/USD moves from 1.08426 to 1.08601. The difference is 0.00175:
0.00175 ÷ 0.0001 = 17.5 pips
For USD/JPY moving from 150.235 to 150.485, the calculation is:
0.250 ÷ 0.01 = 25 pips
These calculations measure distance, not profit. For a long position, a rising price is favorable; for a short position, a falling price is favorable. OANDA’s profit and loss examples show how trade direction and execution prices determine the result.
Pips are not a fixed percentage return either. A rise from 1.2500 to 1.2600 is 100 pips, but the exchange rate has increased by 0.8%, not 1%. Your account return also depends on the size of the position relative to your account.
The Pip Value Formula
Start with the value in the pair’s quote currency:
Pip value in quote currency = position size in base currency units × pip size
If your account uses a different currency, convert that result:
Pip value in account currency = quote currency pip value × account currency units per one unit of quote currency
This is the approach described by FOREX.com’s pip calculator documentation: calculate the value for the position, then convert it into the account currency.
The conversion direction matters. If your result is in yen and the available rate tells you how many yen buy one dollar, divide by that rate. If your result is in pounds and the rate tells you how many dollars buy one pound, multiply.
When the Quote Currency Matches Your Account
For EUR/USD in a USD account, no conversion is needed. A position of 10,000 euros has a pip value of:
10,000 × 0.0001 = $1 per pip
OANDA’s lot size definitions identify a standard lot as 100,000 base currency units, a mini lot as 10,000 and a micro lot as 1,000. Applying those sizes gives:
| Position size | Base currency units | Value per pip | Value of 20 pips |
|---|---|---|---|
| Standard lot | 100,000 EUR | $10.00 | $200.00 |
| Mini lot | 10,000 EUR | $1.00 | $20.00 |
| Micro lot | 1,000 EUR | $0.10 | $2.00 |
These amounts describe price movement before separately charged fees. They are not universal dollar values for every currency pair. For more on contract sizes and order volume, see forex lot sizes.
USD/JPY in a USD Account
Suppose you hold 100,000 units of USD/JPY and the conversion rate is 150.00 yen per dollar. Calculate the yen value first:
100,000 × 0.01 = ¥1,000 per pip
Then convert to dollars:
¥1,000 ÷ 150.00 = approximately $6.67 per pip
At 160.00 yen per dollar, the same ¥1,000 would equal $6.25. The position size and yen pip value have not changed, but the dollar equivalent has.
For realized results, use the conversion rate actually applied by the broker rather than assuming the entry rate remains valid. OANDA’s account statement documentation shows how quote currency results are translated into the account currency and notes that conversion charges can apply.
EUR/GBP in a USD Account
A cross currency pair adds a conversion step, not a different pip formula. For 100,000 units of EUR/GBP:
100,000 × 0.0001 = £10 per pip
If GBP/USD is 1.2500, those pounds convert into dollars as follows:
£10 × 1.2500 = $12.50 per pip
Notice which rate does the converting: GBP/USD, because the pip value starts in pounds and the account uses dollars. Dividing by EUR/GBP would convert the amount into euros, which is not the required account currency here.
What If Your Account Is Not in Dollars?
The same process applies. A 100,000 unit EUR/USD position produces $10 per pip. If the account is denominated in euros and EUR/USD is 1.1000, the euro equivalent is $10 ÷ 1.1000, or approximately €9.09. Always finish the calculation in the currency used to measure your account risk.
Turning Pips Into Profit or Loss
For a position whose size stays unchanged, multiply the signed pip result by its pip value. When conversion is required, calculate the quote currency result first and convert it at the applicable rate.
Consider buying 20,000 EUR/USD at an executed price of 1.08020 and selling the full position at 1.08370:
- Price gain: 0.00350, equivalent to 35 pips.
- Pip value: 20,000 × 0.0001 = $2.
- Trading profit: 35 × $2 = $70 before separately charged fees.
If the exit price were 1.07670 instead, the result would be a 35 pip loss, or $70. For a short trade, reverse the price subtraction: entry price minus exit price.
Raw pip totals can also mislead. Under these assumptions, gaining 20 pips at $1 per pip earns $20, while losing 10 pips at $10 per pip loses $100. The combined result is a $80 loss despite a positive total of 10 pips. Position size cannot be left out of performance comparisons.
How Spreads and Fees Affect Pip Results
The spread is the gap between the bid and ask. You buy at the ask and sell at the bid, as shown in OANDA’s worked execution examples. Expressing that gap in pips makes it easier to translate into cash.
Suppose EUR/USD is quoted at a bid of 1.10000 and an ask of 1.10012. The spread is 1.2 pips. For a 10,000 unit position worth $1 per pip, buying and immediately selling at those unchanged prices would produce a $1.20 loss before other fees.
Do not subtract the spread twice. If you calculate profit from your actual entry and exit fills, the bid and ask difference is already reflected in those prices. A calculation based on chart midprices needs a separate allowance for execution costs.
Commissions, overnight financing and currency conversion charges may still affect the account result. OANDA’s statement breakdown of trading costs distinguishes these entries. The guide to forex broker spreads covers spread pricing in more detail.
You can express a cash commission in pips too. A hypothetical $7 total commission on a position worth $10 per pip equals 0.7 pip. That helps compare costs on the same basis.
Using Pip Value to Estimate Stop Loss Risk
Pip value connects a stop distance to a cash estimate:
Estimated price loss at the stop = stop distance in pips × pip value
A 30 pip stop on a EUR/USD position worth $2 per pip represents a $60 price loss, assuming execution at the chosen stop price. At $10 per pip, the same distance represents $300.
Working backward, a hypothetical $75 price risk budget and a 30 pip stop imply $2.50 per pip. On EUR/USD in a USD account, that corresponds to 25,000 units. This is an arithmetic example, not a suggested risk level. The full process belongs in forex position sizing.
A stop does not make the estimate a guaranteed maximum. FOREX.com’s explanation of slippage notes that orders can execute away from the requested price. Allow for fees and potentially worse execution rather than treating the clean calculation as a promise.
Does Leverage Change Pip Value?
Not when position size remains unchanged. A 10,000 unit EUR/USD position is worth $1 per pip in a USD account regardless of the margin deposited to support it.
The distinction follows from the formulas: pip value uses position size, while margin concerns the funds required to maintain the position. FOREX.com’s margin documentation separates those concepts. A lower margin requirement can permit a larger position, and that larger position increases the cash value of each pip.
Our guide to forex leverage and margin covers the funding side. Do not substitute the margin amount for the trade’s currency units in a pip calculation.
Check Platform Units Before Placing an Order
Platform “points” are not always synonymous with pips. MetaTrader 5’s symbol documentation lists spreads and stop distances in points, alongside separate fields for price digits, contract size and tick size.
If a platform defines one point as 0.00001 on EUR/USD, ten points equal one pip. A displayed distance of 200 such points therefore means 20 pips, not 200. Check the instrument’s settings rather than transferring assumptions from another platform or market.
Before relying on a calculator, confirm the pair, position units, pip size and account currency. Then compare its output with your own calculation. A misplaced decimal can turn a sensible looking order into ten times the intended exposure.