What is a Pip?

A pip is a unit of measurement used in the foreign exchange (forex) market to indicate the smallest change in value between two currencies. A pip is usually the last decimal place of a quotation. For example, if EUR/USD is trading at 1.3000, it means that one euro is equal to 1.3000 US dollars. If the price of EUR/USD moves to 1.3001, then the price has moved one pip.

History of Pips

The term “pip” was first used in the foreign exchange market in the late 19th century. It was derived from the Spanish word “pipa”, which means “a small amount”. The term was used to describe the smallest possible change in the value of a currency. In the early days of the forex market, the pip was the smallest unit of measurement and was equal to 1/100th of a cent.

In the modern forex market, the pip is the smallest unit of measurement and is equal to 1/10,000th of a cent. This means that a one pip move in the price of a currency pair can be equal to as little as 0.0001 cents. This makes the forex market one of the most liquid and volatile markets in the world.

Table of Comparisons

Summary

A pip is a unit of measurement used in the foreign exchange (forex) market to indicate the smallest change in value between two currencies. It is usually the last decimal place of a quotation. In the modern forex market, the pip is the smallest unit of measurement and is equal to 1/10,000th of a cent. This makes the forex market one of the most liquid and volatile markets in the world. For more information about pips, you can visit websites such as Investopedia, Forex.com, and DailyFX.

See Also

• Currency Pair
• Forex Market
• Exchange Rate
• Spread
• Margin
• Leverage
• Lot Size
• Take Profit
• Stop Loss
• Position Trading

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