What is a pip in forex? Pips and lot sizes explained
A pip in forex is the standard unit for measuring how much a currency pair’s price has moved. For most pairs, such as EUR/USD and USD/ZAR, one pip is a change of 0.0001 in the price; for pairs quoted in Japanese yen, such as USD/JPY, one pip is 0.01.
Pips matter because they turn price moves into money. Once you know how many pips a trade moved and how big your position was, you can work out exactly what you made or lost. This guide explains pips, pipettes and lot sizes, with worked examples on three of the most traded pairs.
What does pip stand for?
Pip is usually said to stand for “percentage in point” or “price interest point”. The name matters less than the idea: it gives every trader the same yardstick. When someone says “EUR/USD moved 40 pips today”, everyone knows the size of the move, whatever their account currency.
How do you count pips on EUR/USD?
EUR/USD is quoted to four decimal places, plus often a fifth. The fourth decimal is the pip.
Example: EUR/USD rises from 1.1025 to 1.1050.
- Change: 1.1050 − 1.1025 = 0.0025
- Pips: 0.0025 ÷ 0.0001 = 25 pips
Many platforms show a fifth decimal, for example 1.10253. That last digit is a pipette, or fractional pip, worth one tenth of a pip. A move from 1.10253 to 1.10258 is half a pip. Read more about what moves this pair in our EUR/USD forecast.
Why is a pip different on USD/JPY?
The yen has a much lower value per unit than the dollar or the euro, so yen pairs are quoted with only two decimals (three with a pipette). On USD/JPY, the second decimal is the pip.
Example: USD/JPY rises from 159.70 to 160.20.
- Change: 160.20 − 159.70 = 0.50
- Pips: 0.50 ÷ 0.01 = 50 pips
A common beginner mistake is to treat a USD/JPY move of 0.50 as 5,000 pips by applying the 0.0001 rule. It is 50. This matters a great deal on volatile days, such as when Japan is watching the yen closely, as covered in our USD/JPY report.
How do you count pips on USD/ZAR?
USD/ZAR follows the standard rule: the fourth decimal is the pip. But because the rand trades at many rand per dollar and moves more than major currencies, USD/ZAR moves look large when counted in pips.
Example: USD/ZAR rises from 16.9200 to 17.0200.
- Change: 17.0200 − 16.9200 = 0.1000
- Pips: 0.1000 ÷ 0.0001 = 1,000 pips
A 10-cent move in the rand is 1,000 pips, which is why rand traders should always size positions with care, especially around events like a SARB repo rate decision. See our USD/ZAR coverage for recent moves.
What is a lot size in forex?
A lot is the size of your position, measured in units of the base currency (the first currency in the pair). The common sizes are:
| Lot | Units of base currency | Lots |
|---|---|---|
| Standard | 100,000 | 1.00 |
| Mini | 10,000 | 0.10 |
| Micro | 1,000 | 0.01 |
So 1 lot of EUR/USD controls €100,000, and 0.01 lots controls €1,000.
How do you calculate pip value?
The basic formula is:
Pip value = pip size × position size (in units)
The answer comes out in the quote currency, the second currency in the pair. If that is not your account currency, you convert it.
Pip value on EUR/USD
The quote currency is the dollar, so the result is already in dollars: 0.0001 × 100,000 = $10 per pip for one standard lot, $1 for a mini lot and $0.10 for a micro lot. The 25-pip move above is worth $250, $25 or $2.50.
Pip value on USD/JPY
0.01 × 100,000 = ¥1,000 per pip for one standard lot. To convert to dollars, divide by the exchange rate. At an illustrative rate of 160, ¥1,000 ÷ 160 = about $6.25 per pip. The 50-pip move above is worth roughly $312 on a standard lot, $31 on a mini lot and $3.12 on a micro lot.
Pip value on USD/ZAR
0.0001 × 100,000 = R10 per pip for one standard lot. At an illustrative rate of 17, that is about $0.59 per pip. The 1,000-pip move above is worth R10,000 on a standard lot, R1,000 on a mini lot and R100 on a micro lot.
| Pair | Pip size | Standard lot | Mini lot | Micro lot |
|---|---|---|---|---|
| EUR/USD | 0.0001 | $10 | $1 | $0.10 |
| USD/JPY | 0.01 | ¥1,000 | ¥100 | ¥10 |
| USD/ZAR | 0.0001 | R10 | R1 | R0.10 |
Most trading platforms calculate pip values for you, but doing it by hand once makes it much easier to spot when a position is too large.
Why do pips matter for risk management?
Pips let you set risk before you enter a trade. If you place a stop-loss 20 pips away on one mini lot of EUR/USD, you know the most you plan to lose on that move is about $20, before costs and any slippage. The spread, the gap between the buy and sell price, is also measured in pips, so it tells you how far price must move before a trade breaks even.
A useful habit is to decide your risk in money first, then choose the lot size that fits your stop distance in pips, rather than the other way round.
Frequently asked questions about pips
How much is 1 pip worth?
It depends on the pair and your position size. On EUR/USD, one pip is worth $10 on a standard lot, $1 on a mini lot and $0.10 on a micro lot.
Is a pipette the same as a pip?
No. A pipette is one tenth of a pip: the fifth decimal on most pairs, or the third decimal on yen pairs.
How many pips is a 1 yen move on USD/JPY?
100 pips. A move from 159.00 to 160.00 is 1.00 ÷ 0.01 = 100 pips.
Why do USD/ZAR moves look so big in pips?
Because the rand is quoted at many rand per dollar and is more volatile than major currencies, a single day’s range can easily exceed 1,000 pips. Each pip is worth less in dollars than on EUR/USD, so pip counts across pairs should not be compared directly.
Put the theory into context with our GBP/USD forecast, browse more trading guides, or follow the latest forex news.
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This article is for education and information only and is not financial advice. Figures are as reported by the sources linked above.
