1. Basic FX Terms
2. What is a PIP?
3. Types of FX Trade
4. Trading on Margin
5. FX Order Types
6. Tom-Next Rollovers

What is a PIP?

Welcome to the second in this short FX Education series, aimed at introducing new investors to the basic concepts of FX trading. In this edition, we describe what a PIP is.

Defining a Pip

Currencies are quoted using 5 significant digits. The last digit, called a "pip", represents the smallest potential move in an exchange rate, and is very similar to ticks or points in other financial products. In the example below, a 10 pip increase in the Ask price would result in a quote of 1.2287. Likewise, a 10 pip decrease in the Ask price would result in a quote of 1.2267. Half-pips are a more recent development offering traders even tighter spreads and more competitive and transparent accuracy in pricing. When trading foreign exchange, the value of a pip is dependent on two variables – the amount of currency and the currency pair.

USD Value of a Pip

Below, we have calculated the US Dollar value of a 1 pip movement for some of the more frequently traded currency pairs. Please note, all values are calculated using 100,000 units of the base currency (the left-hand currency in the pair).

EURUSD	USD 10.00
USDCHF	USD 8.00
USDJPY	USD 9.06
GBPUSD	USD 10.00
USDCAD	USD 7.92
AUDUSD	USD 10.00
EURCHF	USD 8.00
EURJPY	USD 9.06
EURGBP	USD 17.98

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