A pip (short for "percentage in point" or "price interest point") is the smallest standardized unit of movement in the price of a currency pair in forex trading.

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For most currency pairs, one pip equals 0.0001, or one-hundredth of one percent, representing the fourth decimal place in the exchange rate. For pairs involving the Japanese yen, a pip is typically 0.01, or the second decimal place.

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Pips are used by traders to measure price changes, calculate spreads, and express profits or losses in forex transactions.

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Example 1:

If the EUR/USD exchange rate moves from 1.1050 to 1.1051, that change of 0.0001 USD is equal to one pip.

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Example 2:

For a practical profit example: If you buy 10,000 euros against the dollar at 1.0801 and sell at 1.0811, the difference is 0.0010, or 10 pips. With a trade size of 10,000, your profit would be $10 (10,000 × 0.0001 × 10 pips = $10).

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