A pip (short for “point in percentage”) measures the smallest price movement in the Forex market and reflects the change in value between two currencies.

To understand how to find a pip, consider the GBP/USD currency pair as an example. In most Forex pairs like this one, a single pip is located at the fourth decimal place — that is, 0.0001, or one-hundredth of one percent. So, if GBP/USD moves from 1.2750 to 1.2751, that 0.0001 increase equals one pip.

For pairs involving the Japanese Yen (JPY) such as EUR/JPY, a pip is found at the second decimal place (0.01). Thus, if EUR/JPY changes from 163.20 to 163.21, the move represents one pip.

Using pips allows traders to measure even the smallest shifts in exchange rates, protecting new traders from significant losses due to large price swings. A smaller unit called a pipette — one-tenth of a pip — provides even greater precision. For non-JPY pairs, pipettes sit on the fifth decimal place, while for JPY pairs, they appear on the third decimal place.