A Point is the minimum change in the exchange rate of a currency pair.
In Forex trading, since currency prices typically move in small increments, they are quoted in standardized units called pips.
One hundred points is a “big number”.
A pip is (usually) the smallest amount by which a currency quote can change.
When trading currencies, pips are the most basic unit of measurement.
Just like liquids are measured in “ounces”, currency quotes are measured in “points”.
Traders often use pips to refer to profits or losses.
For example, a Forex trader might say “I made 90 pips on my trade!”
This means the trader makes a profit of 90 pips. The actual amount of cash this represents depends on the pip value.
Although a pip is a very small unit of measurement, Forex traders are often highly leveraged, meaning that even a single pip move in price can mean huge profits or losses.
For example, if EUR/USD moves from 1.2250 to 1.2251, that is 1 pip.
If you want to learn more foreign exchange trading knowledge, please click: Trading Education.
