What is a pip (point)?

Pip is an increment unit of currencies. The Pip is also a measurement of profit or loss. When the EUR/USD moves from 1.3250 to 1.3251, there is an increment in ONE (1) PIP. A pip is the last decimal place of a quotation. It is important to learn how to calculate the value of a pip for a particular currency, because each currency has its unique value.

1. In the case of USD/JPY, ONE (1) pip would be .01.
Let’s take USD/JPY rate at 120.00.
.01 divided by exchange rate = ONE (1) pip value
.01 / 120.00 = 0.0000833

2. In the case of USD/CHF, ONE (1) pip (point) would be .0001.
Let’s take USD/CHF rate at 1.5260
.0001 divided by exchange rate = ONE (1) pip value
.0001 / 1.5260 = 0.0000655

3. In the case of EUR/USD, ONE (1) pip would be .0001.
Let’s take USD/CHF rate at 1.2200
.0001 divided by exchange rate = ONE (1) pip value
.0001 / 1.2200 = EUR 0.00008196 (Calculated base on EUR)
0.00008196 x 1.2200 = 0.00009999 (Calculated base on USD. 1.2200 is the exchange rate)