What is a pip?
A pip is a measurement of movement in forex trading, used to define the change in value between two currencies. The literal meaning of pip is ‘point in percentage’, and it is the smallest standardised move that a currency quote can change by. Pips are used by traders to calculate the spread between the bid and ask prices of the currency pair, and express the profit or loss that their position has made.
The spread in a currency pair can be quoted in pips, as it is a measure of the market price movement. A pip can be defined as the equivalent of a ‘point’ of movement – at IG we measure currency moves in pips for CFD trades or spread bets, but we refer to them as points.