What is A PIP on the Forex Market?
Definition of a PIP PIP is an acronym for percentage in point. This percentage in point represents the smallest value of measurement for currencies on the forex market. Unlike dollars and cents which are calculated up to two decimal places, the currencies on the forex market are calculated up to the fourth decimal point. The smallest move that a PIP can have is .0001, which represents 1/100th or commonly referred to as 1 basis point. The one exception to the fourth decimal point is the Japanese Yen, which is only calculated up to two decimal places. How are PIPs Calculated PIPs are calculated in terms of currency pairs. Unlike stocks or futures which trade solely based on their own evaluation, the forex market compares the value of two currencies to arrive at a bid and ask price, which is reflected in PIPs. Each currency pair has a base currency which is listed first in the currency pair. So, for example, in the USD/CHF currency pair, the US Dollar is the base currency. This means that
