What is a pip in trading?
What are pips in leverage trading? Our article explains the basics of pips and ticks and how to use them when trading with OANDA
What are pips in leverage trading? Our article explains the basics of pips and ticks and how to use them when trading with OANDA
What is a pip?
In this article you will learn:
 What a pip is and what it represents
 How to calculate gains and losses based on pips
 What is a pipette and why it was introduced
What does “pip” mean?
Pip stands for ‘percentage in point’. A pip in forex trading is the smallest standardised move by which a currency pair quote can change, based on market convention. As it defines the change in price (for instance between two currencies), traders calculate the spread between the bid and ask prices of the traded instrument, and refer to the profit or loss that their position has made in terms of pips.
How does a pip work?
As mentioned above, each one pip move in your favour translates into a profit and every one pip move that goes against you translates into a loss. The size of that move determines how big the profit or loss is. Let’s focus on some reallife examples on how that translates to trading the markets.
How a pip works in currencies
Most currency pairs are priced out to four decimal places and the pip change is the last (fourth) decimal point. One pip, therefore, is equivalent to 1/100 of 1% or one basis point.
The Japanese yen is a notable exception, as these currency pairs are quoted to only two decimal places. To calculate a change in pips in forex trading for, say USD/JPY, you have to look at the second digit after the decimal point.
With a yen currency pair such as USD/JPY, a move of 154.01 to 154.02 would be a singlepip movement. This means that if you decided to enter a long position on the pair at 154.01 and closed your trade as the price reached 154.51, you would make a 50pip profit (154.51  154.01 = 0.50).
Let’s take a look at some examples. Let’s say you’re trading the EUR/USD currency pair. If the market were to move from 1.1600 to 1.1605, that 0.0005 increase would be a 5pip move.
If you had entered a long position (clicking on buy), and the market moved from 1.1600 to 1.1650, and at that point you closed your trade, you would have made a profit of 50 pips (1.1600  1.1650 = 0.0050). Conversely, let’s say you had placed a stop loss at 1.1550 and the market moved against you, dropping from 1.1600 to 1.1550. Assuming there was no slippage, your stoploss order would be hit and you would have made a loss of 50 pips (1.1600  1.1550 = 0.0050).
How pips work in other asset classes
Although the ‘pip’ is a forex naming convention, at OANDA we are not limiting the use of this term to currencies only. The decimal position between instruments in other asset classes varies though, just like it does for the Japanese yen. The reason for this is similar and depends on how many decimal places there are on the price of the instrument that is being quoted by convention. For currency, pips are used, for other asset classes value is refined in points.
Asset class  Instrument example  1 Pip/Point Position (decimal place)  Traded in 

Currencies  AUD/USD  (0.0001)  unit 
USD/JPY  (0.01)  unit  
Commodities  Gold  (0.01)  $/oz 
Silver Copper 
(0.0001) 
$/oz $/Lbs 

Corn Soybeans Wheat 
(0.01)  $/oz  
West Texas Oil Brent Crude Natural gas 
(0.01) 
$/barrel $/MMBtu 

Indices  US SPX  (1.0)  Index points 
Cryptos 
Bitcoin Cash Binance Coin BiCoin Ether Kusama Solana 
(0.1)  $/unit (coin) 
Avalanche Chainlink Litecoin Uniswap 
(0.01)  $/unit (coin)  
Cardano Pokadot EOS Moonbeam Matic Tezos 
(0.001)  $/unit (coin)  
Dogecoin Stellar 
(0.0001)  $/unit (coin)  
Share CFD’s  US  3M CO  (0.1)  USD /unit (share) 
Share CFD'sUK  3I GROUP PLC  (0.1)  GBP /unit (share) 
Share CFD'sDK  AMBU A/S  (0.1)  DKK /unit (share) 
Share CFD'sSE  AAK AB  (0.1)  SEK /unit (share) 
Share CFD'sBE Share CFD'sDE Share CFD'sES Share CFD'sFI Share CFD'sFR Share CFD'sNL Share CFD'sPT 
AB INBEV 1&1 AG ACERINOX SA CARGOTEC OYJ AB SCIENCE AALBERTS NOS SGPS SA 
(0.01)  EUR /unit (share) 
Gains and losses in pips
Example 1:
Let’s say you buy at 1.0598 to open a 100,000 unit trade on USD/CAD when it’s trading at 1.0597/1.0598.
When the value of USD/CAD rises to 1.0618/1.0619, you close the trade by selling at 1.0618. Given that one pip is a movement of 0.0001, you have made a profit of 20 pips (1.0618 – 1.0598 = 0.0020).
Example 2:
Let’s say you open an order to buy a 10,000 unit trade on USD/CAD when it’s trading at 1.0669/1.0670.
The value of USD/CAD falls to 1.0640/1.0641 and hits your stop loss, closing the trade for a 30pip loss (1.0670 – 1.0640 = 0.0030) .
Example 3:
For the next example, let’s say you’re trading gold. The smallest contract size you can trade on our standard platforms is normally one ounce.
Let’s assume you bought 26 ounces of gold at $1750 using an account in dollars, and you have your take profit set at US$1751.23. This means you’re expecting a gain of 123 pips or $1.23 per ounce.
Now you should multiply this by the number of ounces you have bought: 123 pips x 26 ounces = 3198 pips (or $1.23 x 26 ounces = $31.98 profit). This is your expected profit on 26 ounces of gold if your take profit target is reached.
What is a pipette?
Fractional pips are known as "pipettes". A fractional pip is equivalent to 1/10 of a pip, giving you the EUR/USD currency pair with five decimal points, while yen pairs now extend to three decimal points. Pipettes are displayed in superscript format in the quote panel.
You can further build your knowledge of leverage trading by exploring our education content. Besides the introduction to leverage trading articles, we cover topics such as fundamental and technical analysis and the basics of risk management.
Difference between leveraged and other forms of financial trading.
expand_less expand_moreUse fundamental analysis to your advantage.
expand_less expand_moreHow is technical analysis different from fundamental analysis?
expand_less expand_moreHow to build a robust trading strategy using indicators and oscillators.
expand_less expand_more