Pip Definition – What is Pip? | CFI VU


The term pip stands for point in percentage and is the measurement of the smallest price move that a currency can make. Take your time to understand this term in detail as it is especially important for forex traders. A pip measures the fluctuation in the exchange rate between the bid and ask prices for a currency pair and is calculated using the last decimal point.


The spread in forex trading is quoted in pips and is a measure of the price movement in the foreign exchange market. The value of a pip depends on three things: what currency pair is being traded, the exchange rate, and the trade size. Most pairs are shown with 5 decimal places, but there are some exceptions like Japanese yen pairs that are shown with 3 decimal places. For example, for GBP/USD, it is 0.00001, and for USD/JPY, it is 0.001.


Example of a pip


Let us say we have a USD/CHF quote of 0.7747. What this means is that for USD 1, you can buy 0.7747 CHF. Assuming there was a rise in the value of one-pip, this quote would increase to 0.7748. The value of the dollar would rise relative to the Swiss franc because $ 1 would allow you to buy slightly more CHF.


Key takeaways:


  • A pip references a one-pip move in a forex trade.
  • Traders often refer to pips to highlight profit/loss.
  • Most major currency pairs are priced to five decimal places, a pip is usually equal to the fourth figure after the decimal point.


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We would like to remind that while we endeavour to provide best possible services, Credit Financier Invest Limited provides execution only services and any information, reports, opinions, commentary or other materials he receives from CFI directly or from its employees or through any analytical tools provided to him or third party research provided to him from the Company shall not be deemed as investment advice and it cannot be relied upon to make investment decisions. The Client commits to make his own research and from external sources as well to make any investment. The Client accepts that CFI will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. The contents of any report provided should not be construed as an express or implied promise, as a guarantee or implication that clients will profit from the strategies herein, or as a guarantee that losses in connection therewith can, or will be limited.

Forex and CFDs are leveraged products that incur a high level of risk and a small adverse market movement may expose the client to lose the entire invested capital. The vast majority of retail client accounts lose money when trading in CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. The possibility exists that you could sustain a loss in excess of your deposited funds even if a stop loss is used and therefore, you should not speculate with capital that you cannot afford to lose and be aware of trading risks. Credit Financier Invest Limited provides general information that does not take into account your objectives, financial situation or needs. The content of this website must not be interpreted as personal advice. Please ensure that you understand the risks involved and seek independent advice if necessary.

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