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Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.

What is a pip in forex trading?

When trading foreign exchange pairs, it’s important to understand what the currency movement means for your open position. Learn what a pip is in forex trading.

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Visit help and support for more information.

Call 0800 409 6789 or email helpdesk.uk@ig.com if you have any questions about trading or investing. We're available 24/7 between 8am Saturday and 10pm Friday.

Contact us 0800 409 6789

Call 0800 195 3100 or email newaccounts.uk@ig.com to talk about opening an account.

Contact us 0800 195 3100

Get info fast via our instant help and support portal. Available for account queries, ProRealTime, product info and more.

Visit help and support for more information.

Get info fast via our instant help and support portal. Available for account queries, ProRealTime, product info and more.

Visit help and support for more information.

Call 0800 409 6789 or email helpdesk.uk@ig.com if you have any questions about trading or investing. We're available 24/7 between 8am Saturday and 10pm Friday.

Contact us 0800 409 6789

What are pips in forex trading?

Pips in forex trading represent a one-digit movement that’s seen in the fourth decimal place of a FX pair’s price. Pip is short for ‘point in percentage’. For instance, when trading EUR/USD and your open position moves from $1.23456 to $1.23466, that’s a one pip movement.

In the example, the 5 that later increases to 6 is where the one-pip movement is seen. Note that the above doesn’t apply when trading forex for cross currencies like the Japanese yen, where a pip movement is seen on the second decimal place.

A ‘baby pip’ or pipette is observed on the fifth decimal place, which is the final 6 in the example.

Graphic showing a EUR/USD pair and how the pip movement occurs on the fourth decimal place between the two currency pairs.

What is the difference between a pip and pipette?

The difference between a pip and pipette is the decimal places in the quote. The pip is a one-digit movement of the fourth decimal place. On the other hand, the pipette, also known as the ‘baby pip’, is seen with the change on the last decimal place.

Graphic showing the difference between a pip and pipette based on the decimal places on the quote

How to calculate pips in forex trading

The exact value of the pip will be determined by several factors. These include the forex pair you’re trading, the exchange rate between the two currencies and the lot size or monetary value of your trade.

To calculate pips in forex trading you multiply a hundredth (1/100) of one percent (1%) or basis point, which equates to 0.0001 for one pip as seen in the equation below:

Graphic showing an equation for calculating of a pip also known as a basis point

FX pair

One pip

Lost size (base currency)

FX pip value per lot (expressed in quote currency)

Price of your trade

GBP/USD

0.0001

GBP100,000

USD10

1.28960

EUR/USD

0.0001

EUR100,000

USD10

1.96980

USD/JPY

0.01

USD100,000

JPY1000

110.967

USD/CHF

0.0001

USD100,000

CHF10

0.89460

AUD/USD

0.0001

AUD100,000

USD10

1.76780

USD/CAD

0.0001

USD100,000

CAD10

1.88940

NZD/USD

0.0001

NZD100,000

USD10

0.99560

How to calculate forex pips in CFDs

To calculate pips when trading forex CFDs with us, you’ll multiply one pip (0.0001) by the lot size you’ll be trading. For example, if you’re trading a standard lot size of £100,000 (base currency) units per CFD contract for GBP/USD, one pip movement will be valued at $10 (£100,000 x 0.0001 per pip = $10).

Continuing with the same GBP/USD pair as in the previous example, the value of a pip movement for a mini lot size of £10,000 (base currency) units per CFD is equivalent to $1 (£10,000 x 0.0001 per pip = $1).

Graphic showing equations for calculating pip values for a standard and mini lot sizes when trading forex using CFDs. For standard 0.0001 x 100,000 units of base currency. For minis 0.0001 x 10,000 units of base currency

How to calculate forex pips in spread bets

To calculate forex pips when trading using spread bets, you’ll need to know the amount you’re betting per point of movement. This is because spread bets use the amount of money you’ve bet per movement point in a forex pair.

Graphic showing equations for calculating the pip value when trading using spread bets - amount of money you've bet per point of movement

Example of calculating pips in forex trading

When you open a position on GBP/USD and open a quote at $1.28960, a pip movement will be observed on the fourth decimal point seen as the 6. An increase in one pip would result in the quote increasing to $1.28970. This means the quote currency is weaker in relation to the base currency, resulting in more US dollars needed to buy one British pound.

On the other hand, when trading USD/JPY, the quote will only have two decimal places. The second decimal place will show the change in the pip movement. For example, for a quote of ¥123.45, a one-pip decrease would indicate that the Japanese yen was strong against the US dollar, meaning less JPY would be required to buy one USD.

How to trade forex with us

  1. Decide if you’ll be trading forex using spread bets or CFDs
  2. Create a live trading account or practise using a demo account
  3. Choose the forex pair you want to trade
  4. Open your position
  5. Monitor your open position

With us, you can trade forex on the spot via options or using forwards. You can also use spread bets or CFDs. Note that we only offer forex forwards with spread bets. This will enable you to speculate on the rise and fall of spot forex, options and forwards.

When trading spot forex, you’ll do this at the current market price – there are no fixed expiries. With forex forwards, you can trade currency pairs at a set price and specified future or expiry date.

Forex options give you the right, but not the obligation, to buy or sell a currency pair at a set price, if it moves beyond that price within a set timeframe.

Spread bets, CFDs and options are derivative products that use leverage to increase your exposure to the underlying asset you’re trading. Leverage will amplify the profit and loss you make on your trade, depending on whether the market moves in your favour or against you. Ensure that you manage your risk carefully and trade within your financial means.

Also note that the forex market is volatile, which can cause the currency pair you’re trading to experience a rapid price movement within a short timeframe. Ensure you do your technical and fundamental analysis before you open a position.

If you’re not comfortable with trading yet, make use of our free resources on IG Academy to upskill yourself. You can also open a demo account to practise using virtual funds worth £10,000.

FAQs

How much is 10 pips worth?

In forex trading, the worth of 10 pips is dependent on the currency pair that’s being traded, the exchange rate and the lot size. For example, when trading GBP/USD a lot size of £100,000 units would be valued at £10 for one pip (0.0001 x £100,000 = £10). This means in this instance 10 pips would be £100 (£10 x 10 pips = £100)

How do you calculate pip profit?

You’ll calculate a pip profit on your open trade by multiplying the number of pips gained by the value of each pip. For example, if you buy GBP/USD at £100,000 on when the currency pair is trading at 1.1234. If the trade increases to 1.1244, you’d have made a profit of 10 pips.

If the pip value in GBP is £0.89 ([0.0001 x £100,000] /1.1234 = £8.90), then the profit of your trade is £89.02 (10 pips x £0.89 = £89.02). In summary, the pip profit is a multiplication of the pips gained in the trade by the price at which each pip is valued.

How do you read pips?

You read pips by reading the movement of the digit in the fourth decimal place. But the Japanese yen (JPY), Czeck koruna (CZK) and Hungarian forit (HUF) are an exception since they only have two decimal places, so in this case they’ll be the digit movement of the second decimal.

What are the risks involved when trading forex?

There are risks involved when trading forex with leveraged products like spread bets, CFDs and options. Leverage will magnify your profits when the markets work in your favour and will also amplify your losses if they move against you. Ensure that you use our risk management tools.

Develop your forex knowledge with IG

Find out more about forex trading and test yourself with IG Academy’s range of online courses.

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