Pips Explained

If a trader tells you that they made a hundred pips profit, you do not learn anything about their finance situation. If they’re trading a pair like EUR/USD where the buck is the quote currency, 100 pips profit would be $1,000 on a standard lot of $100,000 but only $10 on a $1,000 micro lot. To grasp the size of one pip in dollars in this situation, multiply 0.0001 by the lot size.

To work out profit or loss from pips where the dollar is the quote currency, you just need to understand that one pip is $0.0001 x lot size. If you have another currency as the quote currency, the pip is of course in that currency, and you can multiply by the exchange rate to grasp the pip value in greenbacks.

All of this may seem confusing at first impression but anyone who starts trading will pretty soon understand what a pip means in practice. Currency trading pips are a helpful tool for measuring and recording changes in price in foreign exchange trading.