A pip — short for 'percentage in point' or 'price interest point' — is the smallest standard increment by which most currency pairs are quoted. For pairs quoted to four decimal places, such as EUR/USD, one pip is a move of 0.0001. For yen pairs, which are quoted to two decimal places, one pip is a move of 0.01.
Pips give traders a consistent way to measure and talk about price movement regardless of the pair. Saying EUR/USD 'moved 30 pips' is clearer than quoting the raw decimal change, and it lets you compare moves across pairs on a common scale.
Pips, pipettes, and quotes
Many brokers quote an extra decimal place beyond the pip, called a pipette or fractional pip (one tenth of a pip). So EUR/USD might be quoted as 1.08453, where the final digit is the pipette. This finer pricing is used for tighter spreads, but the pip remains the standard unit traders reference.
The value of a pip in money terms depends on the size of your position. For a standard lot (100,000 units) of a pair where the US dollar is the quote currency, one pip is worth about $10; for a mini lot (10,000 units) it is about $1; and for a micro lot (1,000 units) about $0.10.
Why pips matter for risk
Because pip value scales with position size, pips are the bridge between a price move and your profit or loss. Defining a stop-loss in pips and knowing the pip value of your position lets you size trades so that a given adverse move costs a fixed amount — the foundation of disciplined risk management.