About Lesson
- A pip, short for “percentage in point” or “price interest point,” represents a tiny measure of the change in a currency pair in the forex market. It can be measured in terms of the quote or in terms of the underlying currency.
- A pip is a standardized unit and is the smallest amount by which a currency quote can change.
- Most currency pairs are quoted to the fourth decimal place. A pip represents the last—and thus smallest—of those four numbers.
- Even though a pip is a very small unit of measurement, forex traders are usually heavily leveraged and even a one pip difference can equate to significant profit or loss.
- Pips are the most basic unit of measure in forex trading.