Pips and Points: What They Are in Trading? – MH Markets

In Forex trading, the number of digits shown after the decimal point follows a standard format. Most currency pairs are quoted to four decimal places, while pairs that include the Japanese yen (JPY) are quoted to two decimal places.

Prices in the forex market constantly change, and these changes are measured in pips. A pip—short for “percentage in point”—represents a change of 0.0001, which is one-hundredth of one percent and appears in the fourth decimal place.

The difference between the bid and ask price, known as the Spread, is also measured in pips. So, how much is a pip worth? Let’s break it down.

When USD is the Quote Currency (e.g., EUR/USD)
When USD is the Base Currency (e.g., USD/CAD)
Pip value for JPY Pairs

Calculating Pip Value

A pip is the smallest price movement in most currency pairs, but how much is a pip worth? It depends on three things:

The currency pair you’re trading
The exchange rate

When USD is the Quote Currency (e.g., EUR/USD)

MH Markets offers accounts denominated in USD. For all currency pairs where USD is the quote currency (the second currency in the pair), one pip equals 0.0001.

For example, if you buy EUR/USD at 1.0801 and sell at 1.0811, here’s how to calculate your profit:

Find the pip difference:
1.0811 − 1.0801 = 0.0010, which equals 10 pips.
Convert pips to USD:
For a standard lot (100,000 units of EUR/USD):
0.0010 × 100,000 = $100 profit.

When USD is the Base Currency (e.g., USD/CAD)

Here, the pip value also depends on the exchange rate.

Formula
Pip Value = Trade Size × (Pip Size ÷ Exchange Rate)

So how do you know the exchange rate? For example, if USD/CAD is quoted as 1.2829, that means 1 USD = 1.2829 CAD.

Find the pip difference
For the purpose of this example, let's say that the price difference was 0.0001, 1 pip.
Convert pips to USD
100,000 × (0.0001 ÷ 1.2829) = $7.79 per pip

So, a 1-pip move equals $7.79.

JPY Pairs are built Differently

For yen pairs like USD/JPY or EUR/JPY, prices use two decimal places, so one pip is 0.01.

Find the pip difference
For JPY pairs, 1 pip = 0.01 (because they use two decimal places).
If EUR/JPY moves from 132.62 to 132.63, that’s a 1-pip change
Convert pips to USD
100,000 × (0.01 ÷ 132.62) = $7.79 per pip

What is a Pipette?

A pipette refers to a fractional pip — specifically, one-tenth of a pip. Why does it exist? Traders who rely on small price movements (scalpers, algorithmic traders) need this extra precision.

Pip: the fourth decimal place	0.0001
Pipette: one-tenth of a pip, the fifth decimal place	0.00001