What Is a Pip? The Magic Complete Forex Calculation Guide for Beginners [2025]

what is a pip

Introduction

What is a pip? It’s the heartbeat of Forex trading—the smallest price move a currency pair can make. Mastering pip calculations transforms how you measure profits, manage risk, and execute strategies. In this 2025 guide, you’ll learn to calculate pip values for any pair (even USD/ZAR) and leverage them like a pro.


What Is a Pip in Forex Trading?

pip (Percentage in Point) is:

  • Standard pairs: 0.0001 (e.g., EUR/USD moving 1.1050 → 1.1051 = 1 pip)
  • JPY pairs: 0.01 (e.g., USD/JPY moving 150.00 → 150.01 = 1 pip)

💡 Why it matters: A single pip can mean $10 profit/loss in a standard lot trade.


How to Calculate Pip Value: The Universal Formula

Pip Value = (Pip Size × Lot Size) ÷ Exchange Rate

Step-by-Step Examples:

  1. EUR/USD (Standard Pair):
    • Pip Size: 0.0001
    • Lot Size: 100,000 (standard lot)
    • Rate: 1.1050
    • Calculation: (0.0001 × 100,000) ÷ 1.1050 = $9.05 per pip
  2. USD/JPY (JPY Pair):
    • Pip Size: 0.01
    • Lot Size: 100,000
    • Rate: 150.00
    • Calculation: (0.01 × 100,000) ÷ 150.00 = $6.67 per pip
  3. USD/ZAR (Exotic Pair):
    • Pip Size: 0.0001
    • Lot Size: 100,000
    • Rate: 18.5000
    • Calculation: (0.0001 × 100,000) ÷ 18.5000 = $0.54 per pip

Pip Value Reference Table:

Pair TypeExampleLot SizePip Value
MajorEUR/USDStandard$8–$10
JPYUSD/JPYMini$0.60–$0.80
ExoticUSD/ZARMicro$0.05–$0.07

What Is a Pipette? Precision Beyond the Pip

pipette = 1/10 of a pip (0.00001 for most pairs, 0.001 for JPY):

  • Why brokers use them: Tighter spreads (e.g., EUR/USD quoted as 1.10501 vs. 1.1050)
  • Visual difference:
    • 5-decimal platform: 1.10501 → 1.10502 = 1 pipette
    • 3-decimal JPY platform: 150.000 → 150.001 = 1 pipette

Pips and Lot Sizes: Scaling Your Risk

what is a pip
Lot TypeUnitsEUR/USD Pip ValueRisk per 10-Pip SL
Standard100,000$10$100
Mini10,000$1$10
Micro1,000$0.10$1

🔑 Key Insight: A micro lot lets you risk $1 per 10 pips—ideal for beginners.


Using Pips in Risk Management: The 1% Rule

what is a pip

Step-by-Step Plan:

  1. Set max risk per trade: 1% of $1,000 account = $10
  2. Choose stop loss: 20 pips for EUR/USD trade
  3. Calculate pip value:
    • Micro lot: $0.10/pip
    • 20 pips × $0.10 = $2 risk (within $10 limit)
  4. Scale up safely:
    • Mini lot: $1/pip → Trade size = $10 ÷ (20 pips × $1) = 0.5 mini lots

Conclusion: Your Pip Mastery Blueprint

What is a pip? It’s your profit/loss compass. You now know how to calculate pip values for EUR/USD ($10/lot), USD/JPY ($6.67/lot), and exotics like USD/ZAR ($0.54/lot). Pair this with lot sizing and the 1% risk rule, and you’ll trade with surgical precision. Remember: 90% of consistent traders track pips before entering any position.


❓FAQs – What Is a Pip

Q: What is a pip in Forex?
A: The smallest price move a currency pair can make—0.0001 for EUR/USD, 0.01 for USD/JPY.

Q: How much is 1 pip worth?
A: Depends on pair and lot size:

  • EUR/USD standard lot: $10
  • USD/JPY mini lot: $0.67
  • USD/ZAR micro lot: $0.05

Q: How many pips should I target per trade?
A: Scalpers: 5–10 pips. Swing traders: 50–200 pips. Always base it on support/resistance distances.

Q: What’s the difference between pips and pipettes?
A: 1 pip = 10 pipettes. Pipettes measure fractional moves (e.g., 1.10501 → 1.10502 = 1 pipette).

Q: Are pips the same for all currency pairs?
A: No! JPY pairs use 0.01 (e.g., USD/JPY), others use 0.0001. Exotics like USD/ZAR follow the 0.0001 standard.