What is PIP in Forex Trading

A forex pip, or percentage in point, is a unit of measurement used in the forex market to indicate the smallest change in the exchange rate of a currency pair. It represents the fourth decimal place in most currency pairs, except for those involving the Japanese yen, where it represents the second decimal place.

For example, if the EUR/USD currency pair moves from 1.2000 to 1.2001, it has increased by one pip. Similarly, if the USD/JPY currency pair moves from 110.00 to 110.01, it has also increased by one pip.

Pips are important because they help traders calculate their potential profits or losses on a trade and determine their risk-reward ratio. The value of each pip depends on the size of the trade and the currency pair being traded.

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