A pip (percentage in point) is the smallest unit of price movement in a currency pair. Most currency pairs are measured to four decimal places, so a change from 1.2000 to 1.2001 equals 1 pip.
Why It Matters:
- Pips measure gains or losses in trades.
- Traders calculate profits by multiplying pip change by trade size (lot).
Example:
If EUR/USD moves from 1.1050 to 1.1060, that’s 10 pips.