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What Is Pip?

pips-spreads

To trade Forex successfully every new trader needs to understand the most used and popular forex terms. Two of these popular words are “pips” and “spreads” which show the value of a currency pair to the trader and to the FX broker mainly.


What is a PIP?


The acronym PIP opens as a “Percentage In Point” or “Price Interest Point”, so briefly a PIP is the smallest price movement of a currency. Forex pips allow traders to determine an increase or decrease in foreign exchange values in points. One pip equals 0.0001, two pips equals 0.0002, three pips equals 0.0003 and so on. In the FX trading all profits and losses are measured in pips. For example, in case of EUR/USD1.4502/1.4505 the spread will be 3 pips. The price of the Japanese Yen does not have four numbers after the point. So, for example in an USD/JPY currency pair spread is only given to two decimal points – so a quote for USD/JPY looks like this: 114.05/114.08. This quote has a three pip spread between the buy and sell prices.

 

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