In forex trading, pips and points (also known as pipettes) are units used to measure price movements. While they may seem similar, they represent different levels of precision and understanding the difference is key to accurate trade analysis.
What Is a Pip?
A pip is the standard unit of price movement in most currency pairs.
For most forex pairs,
1 pip = 0.0001
(fourth decimal place).
For JPY pairs,
1 pip = 0.01
(second decimal place).
Example:
If EUR/USD moves from 1.1000 to 1.1001, that’s a 1 pip change.
If USD/JPY moves from 110.00 to 110.01, that’s also 1 pip.
What Is a Point or Pipette?
A point (or pipette) is a fractional pip, equal to 1/10 of a pip.
For most pairs,
1 point = 0.00001
(fifth decimal place).
For JPY pairs,
1 point = 0.001
(third decimal place).
Example:
If EUR/USD moves from 1.10000 to 1.10001, it has moved 1 point.
If USD/JPY moves from 110.000 to 110.001, that’s also 1 point.
Why It Matters
Pipettes allow for greater pricing precision, which is especially useful for scalpers and high-frequency traders. Most modern trading platforms like MT4 and MT5 display both pip and point values, helping traders fine-tune their entries, stops, and take profits.