What Are Pip Digits
Each asset has a defined number of pip digits, which may affect your trading. Here’s what you need to know.
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Pips refer to the distance between prices in Forex trading and pips are usually calculated from the fourth digit following the decimal point in quoted prices. Brokers often cite the spread that they charge in pips.
To understand pips in more detail, the smallest price movement possible in a forex pair is equivalent to 1 pip. For instance, let us say the sell price for the EUR/USD currency pair is 0.87552 and the buy price is 0.87562. This would mean the spread would be 1 pip. At EquityMarket365, we will also indicate the amount a market position has increased or decreased in value in terms of pips. For example, let us say that you bought the AUD/USD pair at 1.21962, but the market ends up moving down to 1.2152. This would mean your position is currently at a loss of 1 pip.
When it comes to the Japanese yen, for currency pairs such as the EUR/JPY and USD/JPY, the value of a pip is 1/100 divided by the exchange rate. For example, if the EUR/JPY is quoted as 132.62, one pip is 1/100 ÷ 132.62 = 0.0000754.