Pip

A pip is the unit used to measure price moves in currency pairs. Most pairs, like EUR/USD and GBP/USD, are read to four decimals and the fourth decimal is one pip: 0.0001. If EUR/USD goes from 1.0850 to 1.0851 it has moved 1 pip; to 1.0900, 50 pips.

Pairs with the Japanese yen are quoted to two decimals, so a pip is 0.01. USD/JPY moving from 149.50 to 149.80 is 30 pips.

Most platforms now show one extra digit, as in 1.08503. That fifth decimal is a tenth of a pip, called a pipette or fractional pip. Keep it separate when counting: 1.08503 to 1.08553 is 5 pips, not 50.

Gold, indices and crypto have no single pip definition. Some platforms count a 0.10 dollar move in gold as a pip, others 0.01; indices usually use points. In those markets, check how your platform defines it.

A pip is a distance; to turn it into money you need the position size. A standard lot is 100,000 units. In pairs quoted in dollars, such as EUR/USD, one pip on a standard lot is about 10 dollars: 100,000 × 0.0001 = 10. On a mini lot (10,000 units) it's 1 dollar, on a micro lot (1,000 units) 10 cents.

When the quote currency isn't the dollar, there's one more step. On USD/JPY one pip on a standard lot is 100,000 × 0.01 = 1,000 yen, about 6.67 dollars when the rate is 150. As the rate moves, pip value shifts a little.

Now measure a trade. EUR/USD has been ranging between 1.0820 and 1.0900. Price rises near the upper edge, to 1.0894. If you consider selling, the stop goes a little above the edge at 1.0908: 14 pips from entry. The lower edge is 74 pips away. Here 14 pips is 1R, and the far edge is a bit more than 5R away.

Size follows. To risk 70 dollars with a 14-pip stop you need 5 dollars per pip, which is 0.5 lots on EUR/USD. With a 28-pip stop, the same risk means 0.25 lots. The order never changes: distance in pips, then risk in money, then size.

Mistaking pipettes for pips. Count the last digit of a five-decimal price and you think you set a 20-pip stop when it is really 2 pips, or you read a 30-pip target as 300. Check once which digit your platform shows.

Assuming pip value is the same everywhere. A pip worth 10 dollars per lot on EUR/USD is under 7 dollars on USD/JPY at 150, and on EUR/GBP it is 10 pounds, which is more than 10 dollars. The same 30-pip stop costs different money on different pairs.

Setting stops by pip count. Twenty pips is a habit, not a place. Find where the idea breaks on the chart and let the pip count follow. If it's large, cut the size instead of pulling the stop closer.

A pip is only distance; it doesn't say whether that distance is big or small. EUR/USD might travel 50 pips on a quiet day while GBP/JPY covers 150. A 30-pip stop sits beyond the structure on one and inside an ordinary candle on the other. Compare distances with the pair's normal movement.

Comparing different markets in pips misleads too. That's why VerTrader scores results in R rather than pips: 1R is the distance of the stop an expert places on the structure. A 2R gain means the same on gold as on EUR/USD.

Spread and slippage are measured in pips as well, and they aren't fixed. A 1-pip spread in a quiet hour can widen to several pips on a major release. On a 10-pip stop, a 3-pip spread is close to a third of your risk.