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What Is a Pip in Forex? How to Count Pips Simply
If you're asking what is a pip, you're asking the single most useful question in forex — because every price move, every spread, and every profit or loss figure you'll ever see is measured in pips. This lesson is part of Module 1 · The Basics in the PipTax FX Trading School, and it's deliberately the first proper "mechanics" lesson: everything else — spread cost, position sizing, stop-loss placement — is built on top of knowing how to count pips.
What Is a Pip, Really?
A pip ("percentage in point" or "price interest point") is the standard unit used to measure how much a currency pair's exchange rate has moved. It gives traders a common language, so instead of saying "the price moved 0.0015", you say "the price moved 15 pips" — much easier to compare across pairs and brokers.
For most currency pairs, a pip is the fourth decimal place. For example:
- EUR/USD moves from 1.0850 to 1.0851 → that's a 1 pip move
- GBP/USD moves from 1.2600 to 1.2650 → that's a 50 pip move
The exception is any pair involving the Japanese yen, where a pip is the second decimal place instead, because the yen has a much smaller unit value relative to other major currencies:
- USD/JPY moves from 149.50 to 149.60 → that's a 10 pip move
Get comfortable with this distinction early — mixing it up is one of the most common beginner errors when reading a chart or a trade confirmation.
Pips vs Pipettes: The Extra Decimal Place
Modern brokers, including Pepperstone and IG, often quote prices to one extra decimal place beyond the traditional pip. This smaller unit is called a pipette (sometimes "fractional pip"):
- EUR/USD quoted as 1.08503 — the "3" at the end is a pipette
- USD/JPY quoted as 149.503 — same idea, one more decimal
Ten pipettes make one pip. Brokers use pipettes to price more precisely and to display tighter spreads, but for most everyday purposes — talking about profit targets, stop-losses, or comparing broker costs — you'll still think and speak in whole pips. Just don't be confused if your platform shows a fifth (or third, for JPY pairs) decimal digit; it's not a different unit, just a finer one.
How to Count Pips: A Step-by-Step Method
Counting pips is simple once you have a repeatable method. Here's the process:
1. Identify the pair type — is it a JPY pair or a non-JPY pair? This tells you which decimal place to watch. 2. Note the entry price and the current (or exit) price. 3. Subtract the two prices, ignoring the sign for now. 4. Read off the pip count from the relevant decimal place.
Example 1 (non-JPY pair): Entry: 1.30250 → Exit: 1.30480 Difference: 0.00230 → 23 pips
Example 2 (JPY pair): Entry: 110.150 → Exit: 110.400 Difference: 0.250 → 25 pips
Practise this on a demo chart before moving on — it should become instant and automatic, because you'll be doing this mental maths every time you check a trade.
Why Pip Value Isn't the Same Everywhere
Counting pips tells you *how far* price has moved. But translating that into pounds or dollars requires knowing the pip value, which depends on three things:
- The currency pair being traded
- The size of your position (lot size)
- Your account's base currency
A pip on a standard lot (100,000 units) of EUR/USD is worth roughly $10 when your account is denominated in USD — but that same pip on GBP/JPY, or on a mini or micro lot, is worth a different amount entirely. This is exactly why position sizing is taught as its own lesson later in Module 1 — pip counting is the input, pip value is the output, and position sizing ties them together with your risk management.
Most platforms — MetaTrader on Pepperstone's servers, or IG's own platform — will calculate pip value for you automatically as you set up a trade ticket. Use that as a check, not a replacement, for understanding the maths yourself.
Where Pips Show Up in Real Trading Costs
Once you can count pips confidently, you'll start noticing they're everywhere in cost discussions:
| Concept | How it's usually quoted | |---|---| | Spread | In pips (e.g. 0.8 pips on EUR/USD) | | Commission | Sometimes flat, sometimes converted to a pip-equivalent | | Swap/rollover | Often shown per lot per night, in the account currency | | Stop-loss distance | In pips from entry | | Take-profit target | In pips from entry |
This is exactly why spreads and commissions are quoted in pips — it lets you compare trading costs across brokers on a like-for-like basis. But published spread figures can vary by account type, time of day, and market conditions, so never assume a number you've read somewhere is what you'll actually pay. Run your own numbers through PipTax's cost audit tool and compare live broker data on the brokers page before opening an account or a trade.
Common Pip-Counting Mistakes to Avoid
Even experienced traders slip up occasionally. Watch out for:
- Confusing JPY and non-JPY decimal places — forgetting that JPY pairs pip at the second decimal, not the fourth
- Miscounting pipettes as pips — a 0.00003 move is not 3 pips, it's 0.3 pips
- Ignoring lot size when estimating pip value — 10 pips on a micro lot is not the same money as 10 pips on a standard lot
- Assuming pip value is fixed across all pairs — it changes depending on which currency is the quote currency
- Reading spread as a fixed cost — spreads widen around news events and low-liquidity periods, so the pip cost of trading isn't static
None of these mistakes are complicated to fix — they just need a bit of deliberate practice on a demo account before you rely on your mental maths with real money on the line.
Conclusion: Mastering What a Pip Is Comes First
Understanding what is a pip and how to count them isn't just trivia — it's the foundation everything else in forex trading sits on, from reading a spread to sizing a position correctly. Take the time to practise counting pips on both JPY and non-JPY pairs until it's second nature, and always verify real costs with a live tool rather than guessing. Continue to the next lesson in Module 1 · The Basics on the PipTax FX Trading School to build on this with spread and cost mechanics.
Key takeaways
- A pip is the standard unit for measuring price movement in forex, usually the fourth decimal place (or second for JPY pairs)
- Most brokers now quote to a fifth decimal (a 'pipette'), which is one-tenth of a pip
- Pip value depends on the pair, your trade size, and the currency your account is denominated in
- Counting pips correctly is essential before you can understand spread cost, stop-loss distance, or position sizing
- Always check a broker's actual pip spreads and commissions with a live cost tool rather than assuming
- This lesson is a prerequisite for later Module 1 topics like spread, lot sizes, and position sizing
Frequently asked questions
- What does pip stand for in forex?
- Pip is usually short for 'percentage in point' or 'price interest point'. In practice, it just means the standard-sized step used to measure how much a currency pair's price has moved.
- How many pips make a pipette?
- Ten pipettes make one pip. A pipette is the fifth decimal place on most pairs (or the third decimal on JPY pairs), giving brokers finer pricing than the traditional pip.
- Is a pip the same value on every currency pair?
- No. The monetary value of a pip depends on the pair you're trading, the size of your position, and your account's base currency. A pip on GBP/JPY is not worth the same as a pip on EUR/USD.
- Why do JPY pairs count pips differently?
- Japanese yen pairs are quoted with only two decimal places instead of four, because one yen is worth much less than one US dollar or euro. So the pip sits at the second decimal, not the fourth.
- Do I need to calculate pip value manually every time?
- No. Most trading platforms and broker calculators, including tools on Pepperstone's and IG's platforms, will show pip value automatically once you set your lot size. It's still worth understanding the maths behind it.
- How does counting pips help with trading costs?
- Spreads and commissions are usually quoted in pips, so once you can count them accurately you can compare broker costs properly. Use PipTax's cost tool to see how pip-based costs stack up across brokers.