A pip is a unit of measurement used to express price changes in forex trading.

For most currency pairs:

• 1 pip = 0.0001

Example:

• EUR/USD moves from 1.1000 to 1.1005
• Price movement = 5 pips

For currency pairs involving the Japanese Yen:

• 1 pip = 0.01

Pips are used to calculate:

• Trade profit and loss
• Stop loss and take profit distances
• Spread costs

Understanding pips helps traders better control risk and position sizing.