What is a pip in trading?

Why traders count in pips

Prices move in tiny steps. Saying “EUR/USD went up 0.0025” is clumsy, so traders say “it went up 25 pips”. Stops, targets and results are all talked about in pips, which is why every trade idea you’ll read uses them.

Pips also let you compare moves without thinking about money. A 50-pip stop is a 50-pip stop whether you trade 0.01 lots or 1 lot. The money comes in later, when you choose your lot size.

Pips on currency pairs

For most pairs, such as EUR/USD, GBP/USD and AUD/USD, one pip is 0.0001, the fourth number after the decimal point.

Price moves from	to	That’s
1.0850	1.0851	1 pip
1.0850	1.0875	25 pips
1.0850	1.0950	100 pips

Pairs with the Japanese yen are quoted with fewer decimals, so one pip is 0.01. If USD/JPY goes from 150.20 to 150.70, that’s 50 pips.

Pips on gold (XAU/USD)

Gold is priced in dollars per ounce, for example 4030.50. Most brokers, and the analysts at Traders World, count a $0.10 move as one pip.

Gold moves from	to	Price move	Pips
4030.00	4030.10	$0.10	1
4030.00	4031.00	$1.00	10
4030.00	4035.00	$5.00	50
4030.00	4040.00	$10.00	100

The quick rule: move a gold price by $1 and you’ve moved 10 pips. So a stop $8 away from your entry is an 80-pip stop.

One warning: not everyone agrees. Some websites call $0.01 a pip on gold, and others call $1.00 a pip. Your profit in dollars is the same whichever way you count, but the pip numbers look very different. When you follow someone else’s trade ideas, check how they count.

Pipettes and MetaTrader’s “points”

Most platforms show one more decimal than the pip: EUR/USD as 1.08505 and gold as 4030.55. That extra digit is a pipette, a tenth of a pip.

MetaTrader 5 measures distances in points, its name for that smallest step. That’s why MT5 often shows numbers ten times bigger than you expect:

• Forex: 1 pip = 10 points (0.0001 = 10 × 0.00001)
• Gold: 1 pip ($0.10) = 10 points (10 × $0.01)

If MT5 says your stop is 800 points away on gold, it’s 80 pips, a move of $8.

What is a pip worth?

On its own, a pip is just a distance. It turns into money when you multiply it by your trade size. For gold and for pairs where the US dollar comes second (EUR/USD, GBP/USD, AUD/USD, NZD/USD), the maths is simple on a dollar account:

Lot size	1 pip is worth
0.01 (micro lot)	$0.10
0.10 (mini lot)	$1
1.00 (standard lot)	$10

For pairs where the dollar comes first, like USD/JPY or USD/CAD, the value of a pip changes slightly with the price. At USD/JPY 150, one pip on a standard lot is worth about $6.67.

Our pip and profit calculator does all of this for you, including the yen pairs.

A worked example

A trade idea says: buy gold at 4032, stop loss at 4024, target 4056.

1. Stop distance: 4032 − 4024 = $8 = 80 pips.
2. Target distance: 4056 − 4032 = $24 = 240 pips.
3. At 0.03 lots, one pip is worth $0.30. If the stop is hit you lose 80 × $0.30 = $24. If the target is hit you make 240 × $0.30 = $72.

That’s a 3-to-1 reward for the risk, before spreads and slippage. The lesson on reading trade ideas walks through the same example in more detail.

Mistakes beginners make with pips

• Mixing up pips and points. Reading 500 points as 500 pips makes a $5 gold move look like a $50 one.
• Assuming a pip is always $1. It’s only $1 at 0.10 lots. At 1 lot it’s $10, and at 0.01 lots it’s ten cents.
• Comparing pip results across providers. “+300 pips this week” from someone who counts $0.01 as a gold pip is only 30 pips the way most people count. Compare results in R or in money instead.
• Forgetting the spread. You start every trade a few pips behind, because you buy at the higher ask price and sell at the lower bid. On gold that’s often 2 to 5 pips, more around news.

Key points

• A pip is a unit of price movement: 0.0001 on most pairs, 0.01 on yen pairs, $0.10 on gold.
• On gold, $1 of movement is 10 pips.
• MetaTrader’s points are ten times smaller than pips.
• A pip’s value depends on your lot size: on gold, $10 per standard lot.

Next, we’ll look at lots: what 0.01, 0.10 and 1.00 actually mean, and how to choose one.