If you're new to Forex trading, "Pip" is probably the most common term you'll hear in every YouTube video, Discord group, or X timeline. But what exactly is it, and why does everyone measure their success in them instead of just using raw dollars?

In this comprehensive beginner’s guide, we will break down exactly what a pip is, how to count them across different currency pairs, and how to use them to calculate your profit.

🚀 Quickly Calculate Your Pips

Tired of manually counting pips? Use the automated TradeHaven Dashboard. Just plug in your Entry and Stop Loss, and it instantly calculates your precise Pip Distance and the exact Lot Size you need to use based on your account balance.

What Does PIP Stand For?

PIP is an acronym that stands for Percentage in Point (or Price Interest Point). It is the standard, globally recognized unit of measurement used to express the change in value between two currencies in a Forex quote.

Because currencies don't fluctuate wildly by whole numbers every day (EUR/USD rarely moves from $1.10 to $2.10 in a year), traders need to measure the fractional changes in the exchange rate.

For the vast majority of currency pairs, a pip is represented by the fourth decimal place in an exchange rate.

How to Read a Pip on the Charts

Let's take the most heavily traded currency pair in the world: EUR/USD (The Euro vs the US Dollar).

If you are looking at a chart and the price moves from 1.1050 to 1.1051, that tiny 0.0001 rise in value is exactly ONE PIP.

A Trading Example:

Your Entry Price (Buy): 1.1050
Your Exit Price (Sell): 1.1070
Your Total Profit = 20 Pips

It is that simple. You always look at the 4th decimal place.

The Japanese Yen Exception 🇯🇵

There is one massive exception in the Forex market that confuses almost every beginner: pairs involving the Japanese Yen (JPY) as the quote currency. This includes popular pairs like USD/JPY, GBP/JPY, and EUR/JPY.

Because the Yen is valued entirely differently (e.g., 1 USD equals roughly 150 Yen), you do not use the fourth decimal place. For Yen pairs, a pip is represented by the second decimal place.

USD/JPY Start Price: 150.10
USD/JPY End Price: 150.15
That is a movement of 5 pips.

Pipettes (Fractional Pips)

If you open your MT4, MT5, or cTrader platform right now, you might notice that brokers actually quote prices to 5 decimal places (or 3 decimal places for JPY pairs).

This final, smaller decimal is called a Pipette, or a fractional pip. It represents exactly 1/10th of a pip. This exists because modern brokers have highly sophisticated liquidity providers and can offer incredibly tight, fractional spreads.

If EUR/USD moves from 1.10500 to 1.10505, it hasn't moved a whole pip yet. It has moved half a pip (5 pipettes). Always ignore the final small decimal when doing your math!

Why Traders Use Pips Over Dollars

You might wonder, "Why do traders say 'I caught 50 pips today' instead of 'I made $500 today'?"

Traders discuss metrics in Pips to normalize data. A 50-pip win means something entirely different depending on the absolute account size and the lot size being used.

A beginner trading Micro Lots (0.01) makes the 50-pip move and earns $5.00.
A professional funded trader using 10 Standard Lots (10.00) makes the exact same 50-pip move and earns $5,000.00.

Using pips standardizes performance. It allows a trader with a $500 account and a trader with a $500,000 account to compare the quality of their strategies and chart setups without money skewing the perspective.

Stop Guessing. Start Systematizing.

The difference between a gambler and a professional is treating trading like a business. If you aren't tracking your Pips, you have no edge.

Here is how you can completely professionalize your trading today:

Journal Your Pips: Create an account and log every trade into the TradeHaven Journal. It automatically tracks your Net Pips, Gross PnL, and Win Rate.
Master Position Sizing: Before you execute, calculate the exact pip distance using the Risk Calculator UI.
Execute: Stick to your proven strategies and let the probabilities play out.

Sign up for TradeHaven for free right now and access the ultimate trader’s dashboard!