What’s a forex pip?

fxThe forex pip is a unit of measurement utilized on the foreign exchange market.

Example #1: The exchange rate for the currency pair EUR/USD went from 1.5331 to 1.5337. This means a 6 pip increase.

Example #2: The exchange rate for the currency pair EUR/USD went from 1.5331 to 1.5320. This is a 2 pip decrease.

Most major currencies of the forex market are priced in four decimal planes, with a pip being one unit of the 4th decimal point, as you can see in both examples above. An important exception is the Japanese Yen (JPY) where a pip is one unit of the 2nd decimal point. A currency pair where one of the currencies is JPY is typically only traded down to the second decimal, even when the trading platform show the price in three decimal planes. Examples of commonly traded currency pairs where the JPY is one of the currencies are EUR/JPY, USD/JPY and GBP/JPY.

Example #3: The exchange rate for the currency pair EUR/JPY went from 141.115 to 141.145. This is a 3 pip increase. It is not a 30 pip increase.