What are Pip and Fractional Pip in the Forex market? Table of Contents

What is Pip?

A pip is the smallest price that occurs in an exchange rate.

For the most part, major currency pairs prices consist of four decimal places.

The last decimal point is called a pip and for most pairs, this is equivalent to 1/100 of one percent.

As most currency pairs have 4 decimal places a 1 pip move in the market would be a move up or down by 1 of the number sitting in the 4th decimal place spot in the quote.

So for example the EUR/USD currency pair is trading at 1.0510 as of this lesson so a move to 1.0511 would be a 1 pip increase in the quote and a move to 1.0509 would be a 1 pip decrease.

What is fractional pip?

As electronic platforms have brought greater price transparency to the Forex market and price competition has heated up some platforms, have been using have added an additional decimal place to their quotes.

Known as Fractional pips, now many of the currency pairs which have traditionally been 4 decimal places quoted out to 5 decimal places and the pairs which have traditionally been quoted out to 2 decimal places quoted out to 3 decimal places.

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