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FOUNDATIONS: COURSE 1 | LESSON 1
Pips, points and price quotes
Learning objectives
By the end you can identify the pip in any quote — including JPY pairs and 5-digit pricing — without counting on your fingers.
By the end you can calculate the dollar value of a pip for any position size on major pairs.
By the end you can convert a price move into money, and money into a price move, in your head.
Welcome to Foundations. From here on, everything is practical — the stuff you'll use on every single trade for as long as you trade. And nothing is more used-on-every-trade than the pip. It's the unit traders measure everything in: profits, losses, spreads, stop distances. Get fluent in pips and the rest of this course reads easily. Skip it, and every later lesson wobbles.
What a pip is (and where to find it)
A pip — "percentage in point" — is the standard unit of price movement for a currency pair. For most pairs, it's the fourth decimal place:
- EUR/USD moves from 1.0850 to 1.0851 → 1 pip.
- GBP/USD moves from 1.2700 to 1.2650 → 50 pips down.
The exception you must memorise: JPY pairs use the second decimal place, because the yen's unit value is so different. USD/JPY moving from 155.00 to 155.01 is 1 pip. From 155.00 to 154.20 is 80 pips down.
Why standardise at all? Because "EUR/USD rose 0.0035" is clumsy and error-prone, while "35 pips" is instant. Traders converse, plan and set rules in pips: "my stop is 30 pips away", "the spread is 1.2 pips", "the news spiked it 60 pips".
Points: the decimal that confuses everyone
Open a live platform and EUR/USD won't show 1.0850 — it'll show 1.08503. That fifth decimal is a point (or "pipette"): one-tenth of a pip. Brokers added it for finer pricing, especially quoting spreads like 0.8 pips.
The rule: on 5-digit pricing, the pip is the fourth decimal, not the last digit. From 1.08503 to 1.08553 is 5.0 pips (50 points). JPY pairs show three decimals: 155.003 → the pip is the second decimal, the third is the point.
This trips up more beginners than anything else in this lesson, usually expensively: someone intends a 30-pip stop, enters "30" in a field measured in points, and gets a 3-pip stop that's hit by ordinary noise within minutes. Know which unit every input field on your platform expects. When in doubt, check the resulting price level, not the number you typed.
While we're reading quotes: you'll see two prices, bid and ask (covered in D1.4), and the spread between them is quoted in pips. EUR/USD at 1.08503 / 1.08511 has a 0.8-pip spread.
Pip value: turning pips into money
A pip is a price unit. To manage risk you need it as a money unit, and that depends on your position size.
The formula for pairs quoted in USD (EUR/USD, GBP/USD, AUD/USD):
Pip value = position size (units of base) × 0.0001
- For the standard sizes (full lot treatment comes next lesson):
| Position | Units | Pip value |
|---|---|---|
| 1.00 lot (standard) | 100,000 | $10.00 |
| 0.10 lot (mini) | 10,000 | $1.00 |
| 0.01 lot (micro) | 1,000 | $0.10 |
These three numbers — $10, $1, $0.10 — are worth carving into your desk. They make you fast:
- A 40-pip gain on 0.1 lots of EUR/USD = 40 × $1 = $40.
- A 25-pip loss on 0.01 lots = 25 × $0.10 = –$2.50.
- The 0.8-pip spread on 1 lot costs 0.8 × $10 = $8 per round trip.
- When the quote currency isn't USD, one extra step converts. For USD/JPY at 155.00, a pip on 1 lot is 100,000 × 0.01 = ¥1,000, which at 155.00 is ¥1,000 ÷ 155.00 ≈ $6.45. You don't need to hand-calculate this daily — the platform and our pip value calculator do it — but you should understand why pip values differ across pairs, so a "same size" position on USD/JPY and EUR/USD doesn't quietly carry different risk.
Fluency drills: both directions
The real skill is converting both ways, instantly.
Pips → money. You're long 0.1 lots of GBP/USD from 1.2700. It's now 1.2762. That's 62 pips × $1 = +$62.
Money → pips. You have a $1,000 account and want to risk at most $20 on a trade (2%). At 0.1 lots ($1/pip), $20 of risk = a stop no further than 20 pips away. Too tight for your idea, which needs a 50-pip stop? Then flip it: $20 ÷ 50 pips = $0.40/pip → trade 0.04 lots. Congratulations — you've just done real position sizing, one lesson early. This money→pips→size chain is the beating heart of risk management, and we'll formalise it in F1.2 and F2.3.
Sanity checks. Daily context stops you planning nonsense: EUR/USD typically ranges 60–100 pips in a day. A 5-pip stop on a swing trade will be eaten by noise; a 500-pip target for a day trade is fantasy. Pips are also how you'll compare costs: a 1-pip spread on a 10-pip scalp is 10% of the move — enormous — while on a 100-pip swing it's 1%.
Key takeaways
A pip is the 4th decimal on most pairs and the 2nd decimal on JPY pairs; the 5th (or 3rd) digit on modern platforms is a point = 0.1 pip.
Confusing pips with points on order inputs is a classic, costly beginner error — verify the resulting price level.
On USD-quoted pairs: $10/pip per standard lot, $1/pip per mini, $0.10/pip per micro. Memorise these.
Pip values differ across pairs (e.g. ~$6.45/pip per lot on USD/JPY at 155) — same lots ≠ same risk.
Fluency means converting pips↔money both ways instantly; that conversion chain is the foundation of position sizing.