If you’re new to forex trading, one of the first terms you’ll hear tossed around is “pips.” Understanding what a pip is, and how it’s used in the forex market, is essential for tracking profits, calculating risk, and managing trades. But how does it compare to trading in markets like crypto, where price movement looks very different? Let’s break it down.
🧮 What Is a Pip in Forex?
A pip, short for “percentage in point” or “price interest point,” is the smallest price movement that a currency pair can make in the forex market, based on market convention.
✅ Example:
In most major forex pairs (like EUR/USD), one pip = 0.0001.
So, if the EUR/USD moves from 1.1050 to 1.1051, that’s a 1-pip movement.
However, for currency pairs involving the Japanese yen (JPY), one pip is usually 0.01 because those currencies are priced to two decimal places (e.g., USD/JPY at 145.65).
📈 Why Are Pips Important?
Pips are used to:
- Measure price movement (volatility)
- Calculate profit and loss
- Determine spread (the difference between bid and ask)
- Set stop-loss and take-profit levels
In forex, you’re often trading with high leverage, so even small pip movements can result in significant gains or losses, making precise pip tracking crucial for risk management.
🔄 How Do Pips Differ from Crypto Price Movements?
Unlike forex, crypto markets don’t use pips. Instead, crypto traders measure price changes in absolute values or percentages.
🔹 Example:
- Bitcoin may move from $42,000 to $42,500.. that’s a $500 move, or ~1.19%.
- There’s no “pip” concept; instead, traders track percentage returns or USD changes.
Also, in crypto, decimal precision varies widely depending on the coin. Many altcoins are priced far below $1, and movements of 0.000001 can represent meaningful gains, whereas forex trading rarely deals with that level of fractional pricing.
💸 Pips vs. Points vs. Basis Points (BPS)
Let’s clear up a few related terms:
- Pip (Forex): 0.0001 (or 0.01 for JPY pairs)
- Point (Stocks): A $1 price move (e.g., AAPL from $189 to $190 = 1 point)
- Basis Point (BPS): Used in bonds or interest rates, where 1 BPS = 0.01%
Each term is used in different financial markets, so it’s important to learn the context.
🚀 Final Thoughts
Pips are a fundamental part of forex trading, allowing traders to measure market movement, calculate risk, and assess profitability. If you’re switching from or dabbling in crypto, stock, or commodities trading, understanding the pip system is essential.
And while crypto doesn’t use pips, both markets rely on precision, volatility, and risk management to succeed.
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At EPIQ Trading Floor, we help traders master both crypto and forex markets. With real-time analysis, step-by-step courses, and high-probability trading strategies, our community is built for serious traders ready to win.
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→ Learn how to use pips, set proper stop-losses, and dominate the charts across all markets.
⚠️ Disclaimer:
This post is for educational purposes only and does not constitute financial advice. Always do your own research and consult with a professional before trading.
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