Pip

A pip is the smallest increment by which an exchange rate can move. One pip is equal to 0.0001 of a major currency pair, such as EUR/USD. For example, if the EUR/USD exchange rate is 1.12345, a pip would be equal to 0.00001 * 1.12345 = 0.0000112345.

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.