If you are new to Forex, pips are one of the first things you need to understand. A pip is a standard unit used to measure how much a currency pair has moved.

What is a Pip?

For most Forex pairs, 1 pip = 0.0001.

For example:

EUR/USD moves from 1.0850 → 1.0860

That is a movement of 10 pips.

For JPY pairs, the pip is usually the second decimal place:

USD/JPY: 150.20 → 150.30 = 10 pips

How to Read Pips on the Chart

When you enter a trade, compare your entry price with your Stop Loss (SL) and Take Profit (TP).

Example:

Sell Entry: 1.0850
Stop Loss: 1.0880
Take Profit: 1.0790

• SL distance = 30 pips

• TP distance = 60 pips

• Risk-to-Reward = 1:2

So, instead of simply looking at price, start looking at how many pips the market is moving.

Pipettes: The Extra Digit

Some brokers display an additional decimal digit. This is called a pipette.

For EUR/USD:

1.08501

The last digit represents a pipette, which is 1/10 of a pip.

So:

10 pipettes = 1 pip

Why Pips Matter

Understanding pips helps you calculate:

• Stop-loss distance

• Take-profit distance

• Risk-to-reward

• Position size

• Potential profit and loss

A trader shouldn't just say, "I entered at 1.0850."

A better question is:

"How many pips am I risking to make how many pips?"

That shift takes you from simply watching price to actually managing a trade.

Learn the movement. Measure the risk. Then take the trade.