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What does PIP mean?

What does PIP mean?

A PIP is the standard smallest increment of change or precision at which a currency is quoted and tracked in Forex markets.

One ‘PIP’ equals .0001 of the size of a lot of currency being exchanged, in terms of the counter currency. A PIP stands for Percentage in Point and is the integer which appears in the 10,000th place when quoting currency exchange rates.

It is actually the same as a Basis Point, used in bond and equity markets, which is 1/100th of 1%. If we were exchanging GBP (British Pounds) for USD (US Dollars), in a Mini-lot of 10,000, one PIP would equal $1.

But if we were exchanging a micro-lot of 1,000, a pip would be worth $0.10. So the monetary value of a pip depends on the size of the lots being traded. The spread or transaction cost in such an exchange is typically quoted using pips.

Keywords: #Forex, basis point, percentage in point, mini-lot, micro-lot,