What a pip is really worth
· 6 min read
A pip is a distance on a chart. Pip value is what that distance costs you, and it depends on three things: the size of the pip, the size of your lot, and the currency your account is held in.
What counts as a pip
For most currency pairs a pip is the fourth decimal, 0.0001. For pairs quoted against the Japanese yen it is the second decimal, 0.01, because the yen trades in the hundreds rather than around one. Many brokers add a fifth decimal, the pipette, which is a tenth of a pip and exists to quote tighter spreads — it does not change what a pip is.
Outside currencies the word gets slippery. Indices move in points, and everyone agrees on that. Metals are the problem: some brokers define a gold pip as 0.10 and others as 0.01, which makes any pip-based figure ambiguous by a factor of ten unless you know which convention applies. This is precisely why sizing gold from entry and stop prices is safer than counting pips.
The calculation
Pip value on a standard lot is the pip size multiplied by the contract size, expressed in the quote currency — the second currency of the pair. On EURUSD: 0.0001 × 100 000 = 10 USD. On USDJPY: 0.01 × 100 000 = 1 000 JPY. On gold with a 0.01 pip and a 100 ounce contract: 1 USD.
If the quote currency is the same as your account currency, you are done, and the value is fixed forever. If it is not, one more step is needed: convert. That conversion is where the accuracy of the whole calculation lives.
The conversion nobody explains properly
Take USDJPY with a dollar account. A pip is 1 000 JPY per lot, and you need that in dollars. The rate you need is JPY to USD, which is one divided by the USDJPY price. At 157.50, a pip is 1 000 ÷ 157.50 = 6.35 USD per standard lot. Notice what this means: the pip value on USDJPY is not fixed. As the pair rises, each pip is worth slightly less in dollars.
The important detail is where that rate comes from. Your entry price is the rate — your broker's own, to the decimal. A calculator that fetches a daily reference rate instead will be off by however much the market has moved since that rate was published, which on a normal day is a few tenths of a percent and on a volatile one is several percent.
The genuinely awkward case is a cross that contains neither of your currencies: GBPJPY on a dollar account, for instance. The pip is in yen, your account is in dollars, and the pair itself tells you nothing about the JPY/USD rate. Here an external rate is unavoidable, and it is worth overriding it with the number your platform shows when the position is large.
A table worth memorising
For a standard lot, with the value expressed in the quote currency before any conversion:
- Any pair quoted to four decimals — 10 units of the quote currency per pip.
- Any pair quoted against the yen — 1 000 JPY per pip.
- Gold at 0.01 per pip, 100 ounce contract — 1 USD per pip.
- Silver at 0.001 per pip, 5 000 ounce contract — 5 USD per pip.
- An index at 1 point per lot — 1 unit of the quote currency per point.
Divide by ten for a mini lot and by a hundred for a micro lot. Then, if your account is in another currency, apply the conversion once at the end.
Frequently asked questions
Why is a pip always 10 dollars on EURUSD?
Because the pair is quoted in dollars and a standard lot is 100 000 units: 0.0001 × 100 000 = 10 USD exactly, regardless of the price. That fixed value only holds if your account is also in dollars; a euro-denominated account converts those 10 USD back at the current rate, so it varies.
What is a pipette?
A tenth of a pip, the fifth decimal on most pairs and the third on yen pairs. Brokers quote them to show finer spreads. If your platform shows a spread of 12, check whether that means 12 pips or 12 pipettes — it is nearly always the latter.
Does pip value depend on leverage?
No. Leverage decides how much margin is locked to open a position, not what the position earns or loses per pip. A 0.10 lot moves the same money per pip at 1:30 as at 1:500; only the collateral requirement changes.
Educational tool. Check the size in your platform before trading; leveraged trading carries a risk of loss.