Pips Explained
From Forex Invincible
Currency trading pips are a vital part of foreign exchange trading that any trader must understand. They are the measure of price movements, and so of profit and loss. Brokers generally interpret pips into bucks and cents for you, or into the currency that your account is held in, if it isn’t US dollars. However , when comparing two trades with different position sizes it is the profit or loss in pips that tells you more than the profit in dollars.
PIP stands for percentage in point. It is used as a measure of change in price . Spread is also measured in pips. The pip is the littlest part of the measured price of a quoted currency.
In practice, most currencies are quoted to four decimal places, e.g. 1.2315. In this example one pip is 0.0001 units of the quote currency. So if that price changes to 1.2316, the price has increased by one pip.
The Japanese yen is the sole one of the major currencies that is low enough in value to be normally quoted to 2 decimal places. So when the yen is the quote currency, one pip is 0.01 yen.