Pip

AAA

DEFINITION of 'Pip'

The smallest price change that a given exchange rate can make. Since most major currency pairs are priced to four decimal places, the smallest change is that of the last decimal point - for most pairs this is the equivalent of 1/100 of one percent, or one basis point.

VIDEO

Loading the player...

BREAKING DOWN 'Pip'

For example, the smallest move the USD/CAD currency pair can make is $0.0001, or one basis point. The smallest move in a currency does not always need to be equal to one basis point, but this is generally the case with most currency pairs.

RELATED TERMS
  1. Exchange Rate

    The price of a nation’s currency in terms of another currency. ...
  2. Mini-Lot

    A currency trading lot size that is 1/10 the size of the standard ...
  3. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote ...
  4. Currency

    A generally accepted form of money, including coins and paper ...
  5. Currency Pair

    The quotation and pricing structure of the currencies traded ...
  6. Performance Index Paper - PIP

    Short-term paper on which the rate of interest is denominated ...
Related Articles
  1. Forex Education

    Currency Exchange: Floating Rate Vs. Fixed Rate

    Baffled by exchange rates? Wonder why some currencies fluctuate while others are pegged? This article has the answers.
  2. Forex Education

    Top 7 Questions About Currency Trading Answered

    Whether you're puzzled by pips or curious about carry trades, your queries are answered here.
  3. Forex Education

    A Beginner's Guide To Scalping In The Forex Markets

    We look at what scalping is, how to do it and the characteristics of a successful forex scalper.
  4. Forex Education

    Forex: The Moving Average MACD Combo

    Learn a strategy with clear entry and exit levels that will get you into a trend at the right time.
  5. Bonds & Fixed Income

    6 Factors That Influence Exchange Rates

    Find out how a currency's relative value reflects a country's economic health and impacts your investment returns.
  6. Forex Education

    The Foreign Exchange Interbank Market

    Can your forex broker offer you the most competitive pricing? Learn how the market's biggest players affect you.
  7. Forex Education

    Spread-To-Pip Potential: Which Pairs Are Worth Day Trading?

    Spreads play a significant factor in profitable forex trading. Learn when it's worth trading and when it isn't.
  8. Forex Education

    Forex Minis Shrink Risk Exposure

    Trading less than a standard lot means getting in for less - and having less to lose.
  9. Forex Education

    Make The Currency Cross Your Boss

    Tap into a world of possibilities by going beyond the simple pro- or anti-dollar trade.
  10. Forex Education

    An Introduction To Ichimoku Charts In Forex Trading

    Discover how this high-flying application can be used in forex trading.
RELATED FAQS
  1. Where did the term 'pip' in currency exchange come from?

    The term pip is an acronym for percentage in point or price interest point. It measures a unit of change within a pair of ... Read Full Answer >>
  2. How do you make money trading money?

    Investors can trade almost any currency in the world. Investors, as individuals, countries, and corporations, may trade in ... Read Full Answer >>
  3. In the forex market, how is the closing price of a currency pair determined?

    The foreign exchange market, or forex, is the market in which the currencies of the world are traded by governments, banks, ... Read Full Answer >>
  4. What is the value of one pip and why are they different between currency pairs?

    In forex markets, currency trading is done on some of the world's most powerful currencies. The major currencies traded are ... Read Full Answer >>
  5. Why is my 401(k) not FDIC-Insured?

    401(k) plans are not FDIC-insured because they are typically composed of investments rather than deposits. The Federal Deposit ... Read Full Answer >>
  6. How is the value of a pip determined?

    A pip in foreign exchange trading is a measure of a price movement in a currency pair. "Pip" is an acronym for price interest ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Stock Market Crash

    A rapid and often unanticipated drop in stock prices. A stock market crash can be the result of major catastrophic events, ...
  2. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  3. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  4. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  5. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
  6. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!