Pip stands for percentage in points, and is the smallest price change that a given exchange rate can make. Most major currency pairs are displayed to four decimal places so one pip is equal to 0.0001. Yen-based currency pairs are an exception and are displayed to only two decimal places (0.01).
Forex traders and analysts often use pips to reference moves. A trader might say “I made 50 pips on the trade” which means that the trader profited by 50 pips. The actual cash amount this represents however, depends on the pip value.<< Back to Glossary Index