WHAT THE HECK IS A PIP ?

PIP refers to Percentage in Price and it is the smallest increment of price fluctuation in currency prices.

Pips can also be referred to as points: the two terms can however be used interchangeably. Remember this is the beginning of your future millions so please pay attention.

The movement of every currency pair is calculated by the amount of PIPS the price has moved up or down by. Each currency pair is given to five decimal places with the fourth one being the PIP. The fifth decimal is known as the PIPETTE, which is one point of a PIP.

Example

The bid price of this currency pair AUD/USD shown on the left is 0.75167

While the quote price on the right is 0.75172

The number 7 in the bid price would be classified as a PIPETTE

The number 2 in the quote price would be classified as a PIPETTE

PIP Difference 

The pip difference between the bid & quote price is

0.75172 – 0.75167= 0.5 Pipettes.

This difference is known as the SPREAD as stated earlier

SCENARIO: say AUD/USD moved from 0.7516 to 0.7520. In order to figure out the pip difference, it is a case of simple math, therefore price increased by 4 PIP’s.

The PIP count is where the money is made and are the underlying basis for making profits in the market with the primary aim being; get pips, keep pips, repeat!

NB:  Yen-based currency pairs are an exception, where the PIP is given to two decimal places. The third decimal is, as previously mentioned, known as a PIPETTE.

i.        EUR/USD: 1.2040

ii.        USD/JPY: 110.50

iii.        AUD/USD: 0.7550

iv.        EUR/JPY: 138.00

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