Pip in forex, in 30 seconds
A pip stands for "percentage in point" or "price interest point". It is the smallest standard unit of price movement in a forex pair. For most currency pairs, one pip equals 0.0001 (the fourth decimal place). For JPY pairs like USD/JPY, EUR/JPY, and GBP/JPY, one pip equals 0.01 (the second decimal place).
- On a standard lot (100,000 units) of EUR/USD, 1 pip is worth $10.
- On a mini lot (10,000 units), 1 pip is worth $1. On a micro lot (1,000 units), 1 pip is worth $0.10.
- MT5 shows prices to 5 decimals (or 3 for JPY pairs). The last digit is a pipette, which is 1/10 of a pip.
What does pip stand for?
Pip is short for "percentage in point" or "price interest point". It came from the early days of currency quoting, when banks needed a way to refer to the smallest meaningful change in an exchange rate without saying "the fourth decimal place" every time. A pip is that unit.
For a pair quoted to 4 decimals (EUR/USD at 1.0850), 1 pip = 0.0001. A move from 1.0850 to 1.0851 is one pip. For JPY pairs quoted to 2 decimals (USD/JPY at 150.20), 1 pip = 0.01, because JPY values are roughly 100x smaller in magnitude. The pip definition is calibrated so 1 pip means roughly the same economic value across pairs.
Modern platforms like MetaTrader 5 quote prices to 5 decimal places (or 3 for JPY pairs). That extra digit is called a fractional pip or pipette, and it is one tenth of a pip. So when MT5 shows EUR/USD at 1.08501, the final 1 is a pipette, not a pip.
Quick rule: If the pair has 4 decimals (or 5 with a pipette), 1 pip = 0.0001. If the pair has 2 decimals (or 3 with a pipette), 1 pip = 0.01. This applies to every JPY pair on every platform.
How pips are calculated, with worked examples
Calculating a pip move on any pair is the same idea: count how far the price has shifted in the pip decimal place. For non-JPY pairs that is the fourth decimal. For JPY pairs that is the second decimal.
Here are concrete examples across the major pair types you will see on MT5:
| Pair | Before | After | Pip move |
|---|---|---|---|
| EUR/USD | 1.0850 | 1.0851 | 1 pip (0.0001) |
| GBP/USD | 1.2700 | 1.2701 | 1 pip (0.0001) |
| USD/JPY | 150.20 | 150.21 | 1 pip (0.01 because JPY) |
| AUD/USD | 0.6540 | 0.6545 | 5 pips (0.0005) |
| XAU/USD | 2050.00 | 2050.10 | 10 pips (0.10 on gold) |
The XAU/USD row shows that the "pip" concept on metals is less standardised. Many brokers, including LHFX, treat 1 pip on gold as a $0.10 move because that keeps pip value comparable across instruments. Some platforms call it a "point" instead. Always check the contract specification for the exact pip definition on each non-forex instrument.
How to calculate pip value
Pip value is what a single pip is worth in your account currency. It depends on the pair, the lot size, and the current exchange rate. The general formula is straightforward.
Pip value formula
pip_value = (pip_size / exchange_rate) x lot_size
Where pip_size is 0.0001 for most pairs or 0.01 for JPY pairs, exchange_rate is the current quote, and lot_size is the number of units (100,000 for 1 standard lot).
Example 1, EUR/USD at 1.0850. Pip value = (0.0001 / 1.0850) x 100,000 = 9.22 EUR per pip. Convert to USD at 1.0850 and you get roughly $10. That is why most calculators just say "1 pip = $10 on a standard lot of EUR/USD". The USD quote currency means the math collapses to a clean number.
Example 2, USD/JPY at 150.20. Pip value = (0.01 / 150.20) x 100,000 = 6.66 USD per pip. JPY pairs do not give the clean $10 result because the quote currency is JPY, not USD. The pip value floats with the exchange rate, but for any USD/JPY trade it is usually in the $6 to $7 range per pip per standard lot.
Skip the math, use the calculator
The LHFX pip calculator handles every pair, including JPY crosses, metals, and indices. Enter your lot size and account currency and get the exact pip value in seconds.
Open the pip calculatorPip value by lot size
Pip value scales linearly with lot size. If you halve the lot, you halve the pip value. The table below shows pip value for EUR/USD across the four standard lot sizes you can trade in MT5.
| Lot type | Units of base currency | Pip value (EUR/USD) |
|---|---|---|
| Standard | 100,000 | $10.00 |
| Mini (0.10) | 10,000 | $1.00 |
| Micro (0.01) | 1,000 | $0.10 |
| Nano (0.001) | 100 | $0.01 |
Nano lots are not supported on every MT5 broker, but they are useful for forward-testing strategies with real money risk in tiny increments. On a $1,000 account, a 0.01 micro lot with a 50-pip stop loss costs only $5, which is a sensible 0.5% risk per trade for a beginner.
Pip vs pipette vs point
These three words get used interchangeably in trader chat, which leads to a lot of confusion. They are not the same thing.
Pip
The standard unit. 0.0001 for non-JPY pairs, 0.01 for JPY pairs. This is what spread, profit, and loss are quoted in.
Pipette (fractional pip)
One tenth of a pip. 0.00001 for non-JPY pairs, 0.001 for JPY pairs. Introduced when brokers started competing on tighter spreads and needed sub-pip precision. A spread of 0.3 pips is really 3 pipettes.
Point
An ambiguous term. On MT5, a "point" usually means a pipette (the smallest price increment the platform can display). On some other platforms, a "point" means a full pip. When a broker advertises "spreads from 1 point", read the fine print to know which one they mean.
On MT5 specifically: EUR/USD displayed as 1.08501 shows 5 decimals. The first 4 are pips, the 5th is a pipette. A spread shown as "3" in MT5 means 3 points (pipettes), which equals 0.3 pips.
How pips work on LHFX
LHFX runs MT5 with raw STP/ECN pricing. Spreads are quoted in pips and pipettes, and execution is commission-based, so the pip cost on every trade is transparent.
from 0.0 pips on majors during liquid sessions. Spreads widen during news and off-hours like any STP feed, but there is no markup added on top.
$3 per side per standard lot, or $6 round-turn. On a 1-pip spread that adds 0.6 pips of equivalent cost to your trade, for a total round-trip cost of around 1.6 pips on a major pair.
5-decimal pricing on non-JPY pairs and 3-decimal pricing on JPY pairs. Your spread, swap, and pip value all show in the trade ticket before you click buy or sell.
STP/ECN. Your orders go to the liquidity pool, not a dealing desk. Pip slippage is whatever the market gives you, not what a market maker chooses to show.
For the full breakdown of spreads and commissions by instrument, see the spreads and fees page.
Why pip value matters for risk management
Pip value is not just an abstract number. It is the building block of every risk calculation you make as a trader. Position size, stop loss distance, and risk per trade all come back to pip value.
A common rule is to risk no more than 1% of your account per trade. On a $1,000 account, that is $10. If your strategy uses a 50-pip stop loss on EUR/USD, your position size has to be such that 50 pips equals $10. That means a pip value of $0.20, which is roughly 0.02 lots (a 2x micro lot). Without knowing pip value, you cannot size the trade correctly.
Skipping this calculation is one of the most common reasons retail accounts blow up. Traders pick a lot size based on what their balance allows them to open, not on what their stop loss can absorb. Knowing pip value, and using a calculator to verify it on every trade, is the difference between trading a plan and gambling.
Risk disclosure: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Never trade with money you cannot afford to lose.