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#### DEFINITION of 'Pip'

In finance, specifically in

**foreign exchange**markets, a**percentage in point**(**pip**) is a unit of change in an exchange rate of a currency pair. Since most major currency pairs are priced to**four decimal places**, the smallest change is that of the last decimal point – for most pairs this is the equivalent of**1/100 of one percent**, or one basis point.For **example**, the smallest move USD/CAD currency pair can make is $0.0001, or one basis point. The smallest move in a currency does not always need to be equal to one basis point, but this is generally the case with most currency pairs.

A pip is sometimes confused with the smallest unit of change in a quote, i.e. the **tick size**. Currency pairs are often quoted to four decimal places, but the tick size in a given market may be, for example, **5 pips** or** 1/2 pip**.

#### Trading value

A

**rate change**of one pip may be related to the**value change of a position**in a currency market.**Currency**is typically traded in lot size of**100,000 units**of the base currency. A trading position of one lot that experiences a rate change of**1 pip**therefore changes in value by**10 units**of the**quoted currency**.^{}