Pip stands for percentage in point, the smallest increment by which a Forex cross price changes.

Most currency pairs are quoted to four decimal places, meaning that a movement from 1.1850 to 1.1851 for a currency pair would constitute one pip.

For a particular position, you can calculate the value of a single pip using the above formula.

For instance, you know that the EUR/USD is quoted with four decimals, so for a given position you can multiply the position amount by the value of one pip, or USD 0.0001.

So, on a EUR/USD 100,000 contract, one pip would equal USD 10. On a USD/JPY 100,000 contract, one pip is equal to JPY 1000 because USD/JPY is quoted with only two decimals (meaning one pip = JPY 0.01).

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