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Pip (Percentage in Point)

A pip (Percentage in Point) is the smallest price movement in a currency pair in the foreign exchange (Forex) market. For most currency pairs, a pip is equivalent to 0.0001, representing a one-hundredth of a percentage point. Pips are used to measure price movements and determine profit or loss in Forex trading. They are fundamental to calculating the spread, which is the difference between the bid and ask prices.

Example

If the EUR/USD currency pair moves from 1.1000 to 1.1005, it has increased by 5 pips, representing a small change in the exchange rate.

Key points

• Represents the smallest price movement in a currency pair.

• Typically equals 0.0001 for most major currency pairs.

• Used to measure price changes and calculate spreads in Forex trading.

Quick Answers to Curious Questions

They help traders measure price movements, calculate spreads, and determine profit or loss in currency trades.

The spread is measured in pips and represents the difference between the buying (bid) and selling (ask) prices.

Traders use the change in pips to determine the gain or loss on a currency trade, based on position size and price movement.

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