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Basics · Forex Glossary

Pip — Definition & Meaning in Forex Trading

A clear, practical definition of pip written for EU retail forex traders.

Quick Answer

Pip: Percentage in Point. The smallest standard price movement in a currency pair, typically the fourth decimal place (0.0001) for most pairs. For JPY pairs, a pip is the second decimal (0.01).

What does Pip mean?

Pip is a basics concept every forex trader should understand. Percentage in Point. The smallest standard price movement in a currency pair, typically the fourth decimal place (0.0001) for most pairs. For JPY pairs, a pip is the second decimal (0.01). Traders encounter pip throughout day-to-day decision-making, and a solid grasp of the idea helps avoid costly mistakes — especially for EU retail traders operating under ESMA rules where leverage caps, negative balance protection, and investor compensation schemes all intersect with practical trading concepts like this one.

How is Pip used?

In practice, Pip is one of the first things a new forex trader encounters. You will see pip referenced in account statements, order tickets, platform documentation, and broker marketing. Internalising the idea early helps avoid confusion later when more advanced concepts build on this foundation.

Example

For example, a trader opening a 0.1 lot (10,000-unit) EUR/USD position at 1.0850 who later closes at 1.0875 would reference pip as part of the round-trip trade. The specifics depend on your broker and account type, but the core idea of pip remains consistent across EU-regulated venues.

Related Terms

Other basics concepts worth knowing.

Ask

The price at which a seller is willing to sell a currency pair. Also known as the offer price. When you open a buy (long) position, you enter at the ask price.

Base Currency

The first currency listed in a currency pair. In EUR/USD, EUR is the base currency. It represents the currency you are buying or selling.

Bear Market

A market condition where prices are falling or expected to fall. A bearish trader believes prices will decline and may take short positions.

Bid

The price at which a buyer is willing to purchase a currency pair. When you open a sell (short) position, you enter at the bid price. The bid is always lower than the ask.

Broker

A financial intermediary that provides traders with access to the forex market. In the EU, brokers must be regulated by authorities such as CySEC, BaFin, or the FCA.

Bull Market

A market condition where prices are rising or expected to rise. A bullish trader believes prices will increase and may take long positions.

Learn More

Deeper reading in our Learning Center.

Frequently Asked Questions

What does Pip mean in forex trading?
Percentage in Point. The smallest standard price movement in a currency pair, typically the fourth decimal place (0.0001) for most pairs. For JPY pairs, a pip is the second decimal (0.01).
How is Pip used by traders?
In practice, Pip is one of the first things a new forex trader encounters. You will see pip referenced in account statements, order tickets, platform documentation, and broker marketing. Internalising the idea early helps avoid confusion later when more advanced concepts build on this foundation.
Why does Pip matter for EU retail traders?
Understanding pip helps EU retail traders make informed decisions under ESMA rules. Every regulated broker in Europe publishes Key Information Documents and platform documentation that reference concepts like pip, so knowing the terminology is essential before funding a live account.
Where can I learn more about Pip?
Our Learning Center and Guides section cover basics concepts in depth. You can also explore related terms in the same category through our full forex glossary.

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