Risk management
What Is a Pip? Pips, Pipettes and MT5 Points Explained
What is a pip in forex: pip size, pipettes, MT5 points, yen pairs and how to calculate pip value in your account currency, with worked examples.
A pip is the standard unit for measuring a change in an exchange rate. Traders quote stops, targets and spreads in pips because a pip means roughly the same thing across most pairs, while the money value of a move depends on position size and account currency. Getting from pips to money correctly is the foundation of every risk calculation.
Pip size
For most currency pairs, one pip is 0.0001, the fourth decimal place. If EUR/USD moves from 1.1000 to 1.1025, it has moved 25 pips.
Pairs quoted against the Japanese yen are the main exception. Because a yen is worth a small fraction of a dollar or euro, these pairs are quoted with two decimal places, and one pip is 0.01. If USD/JPY moves from 150.00 to 150.40, it has moved 40 pips.
| Pair type | Typical quote | One pip | One pipette |
|---|---|---|---|
| Most pairs (EUR/USD, GBP/USD, AUD/CAD) | 1.10253 | 0.0001 | 0.00001 |
| Yen pairs (USD/JPY, EUR/JPY, GBP/JPY) | 150.257 | 0.01 | 0.001 |
Pipettes and fractional pricing
Most brokers now quote one extra digit: five decimals on standard pairs and three on yen pairs. That last digit is a pipette, or fractional pip, worth one tenth of a pip. A EUR/USD quote of 1.10253 is 1.1025 plus three pipettes.
The extra digit matters mainly for spreads and small targets. A spread shown as 1.3 pips is 13 pipettes. Confusing the two is a common source of stop and target errors when traders copy settings between platforms.
Pips versus MT5 points
MetaTrader 5 does not think in pips. It uses the point, which is the smallest price increment of the symbol as quoted by the broker. On a five-digit EUR/USD feed, one point is 0.00001, so 10 points equal one pip. On a three-digit USD/JPY feed, one point is 0.001, again one tenth of a pip.
This has practical consequences:
- MT5 shows spreads in points. A spread of 12 in Market Watch on EUR/USD is 1.2 pips.
- Expert Advisor inputs written in points need ten times the number you would use in pips. A "50" stop meant as 50 pips becomes a 5-pip stop if the code reads it as points on a five-digit symbol.
- For gold, indices and other CFDs, there is no universal pip. Point size and digits vary by broker and symbol, so check the contract specification before assuming anything.
Pip value: the three cases
Pip value is the money gained or lost per pip on a given position size. A standard lot is 100,000 units of the base currency, a mini lot 10,000 and a micro lot 1,000. In the quote currency, a pip on one standard lot is always pip size × 100,000: $10 on EUR/USD, ¥1,000 on USD/JPY.
The work is converting that into your account currency. There are three cases.
Case 1: the account currency is the quote currency. No conversion. A USD account trading EUR/USD earns or loses $10 per pip per standard lot.
Case 2: the account currency is the base currency. Divide by the pair's own rate. A USD account trading USD/CHF at 0.8000 makes CHF 10 per pip per lot, which is 10 ÷ 0.8000 = $12.50. Trading USD/JPY at 150.00, the ¥1,000 per pip is 1,000 ÷ 150.00 = $6.67.
Case 3: the account currency is neither. Convert the quote currency into the account currency through a third rate. A USD account trading EUR/GBP makes £10 per pip per lot. With GBP/USD at 1.2700, that is £10 × 1.2700 = $12.70.
| Account | Pair | Pip value in quote currency (1 lot) | Conversion | Pip value in account currency |
|---|---|---|---|---|
| USD | EUR/USD | $10 | None | $10.00 |
| USD | USD/CHF at 0.8000 | CHF 10 | ÷ 0.8000 | $12.50 |
| USD | USD/JPY at 150.00 | ¥1,000 | ÷ 150.00 | $6.67 |
| USD | EUR/GBP, GBP/USD at 1.2700 | £10 | × 1.2700 | $12.70 |
For a mini lot, divide each result by 10. For a micro lot, divide by 100. The pip value calculator handles all three cases for the main account currencies.
Yen pairs in practice
Yen pairs need two adjustments: the pip is 0.01, and the pip value almost always needs converting because few accounts are denominated in yen.
Take GBP/JPY in a USD account. One pip on one lot is ¥1,000. To express it in dollars, divide by USD/JPY. At 150.00, that is $6.67 per pip. If USD/JPY falls to 140.00, the same pip is worth 1,000 ÷ 140.00 = $7.14. If it rises to 160.00, it is worth $6.25.
A pip at 140 is worth about 14% more than a pip at 160, so the risk on a fixed lot size changes even though the GBP/JPY chart looks the same. This is one reason to size each trade fresh rather than reusing a lot size from last month.
Why pip value changes and how it goes wrong
Pip value is constant only in Case 1. In the other cases it moves with exchange rates, which means the money risk on an open trade drifts while you hold it. The drift is usually small over a day and can be material over months.
The common errors are predictable:
- Treating every pair as $10 per pip per lot. That is only true when the quote currency is the account currency.
- Mixing pips and points when copying EA settings or broker stop levels.
- Using a stale conversion rate, especially on yen crosses.
- Assuming metals and indices follow forex pip conventions.
Once pip value is right, the rest of the sizing arithmetic is simple. The position sizing guide shows how pip value feeds into lot size, and the leverage and margin guide explains why the margin a trade ties up is a different number from the money it risks.
Key points
- One pip is 0.0001 on most pairs and 0.01 on yen pairs; a pipette is one tenth of a pip.
- MT5 measures prices in points, which are pipettes on five-digit and three-digit feeds, so 10 points make one pip.
- Pip value per standard lot is pip size × 100,000 in the quote currency, converted into your account currency.
- Pip value changes with exchange rates unless the account currency is the quote currency.