Definition of 'Pip'
Pips are used to measure the change in an exchange rate. For example, if the EUR/USD exchange rate moves from 1.12345 to 1.12350, the change would be 0.00005, or 5 pips.
Pips are also used to calculate the profit or loss on a currency trade. For example, if you buy 100,000 EUR at an exchange rate of 1.12345 and sell them at an exchange rate of 1.12350, you would make a profit of 50 pips, or $5.
It is important to note that the size of a pip can vary depending on the currency pair. For example, one pip in the EUR/USD exchange rate is equal to 0.0001, but one pip in the GBP/USD exchange rate is equal to 0.00001.
Pips are a useful tool for traders who want to track the movement of exchange rates. However, it is important to understand the size of a pip before trading, as this can have a significant impact on your profits or losses.
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