What is a pip?
A pip is the standard unit used to measure price moves in forex. For most pairs it is the fourth decimal (0.0001); for pairs quoted in Japanese yen it is the second decimal (0.01). When EURUSD moves from 1.0850 to 1.0851 it has moved one pip.
Brokers often quote a fifth decimal, called a pipette or fractional pip. Ten pipettes make one pip.
Pip value formula
Pip value = pip size × contract size × lots. When the quote currency is USD (EURUSD, GBPUSD, XAUUSD) the result is already in dollars: one pip on one standard lot of EURUSD is 0.0001 × 100,000 = $10.
When USD is the base currency (USDJPY, USDCAD, USDCHF) the result is in the quote currency, so it is divided by the current price. That is why the pip value of USDJPY changes every day and the calculator uses live quotes.
| Lot | Units | EURUSD pip value |
|---|---|---|
| Standard (1.00) | 100,000 | $10.00 |
| Mini (0.10) | 10,000 | $1.00 |
| Micro (0.01) | 1,000 | $0.10 |
Why pip value matters for risk
Your risk on a trade is the stop distance in pips multiplied by the pip value. A 25-pip stop on 2 standard lots of EURUSD risks 25 × $20 = $500. Knowing the pip value lets you pick a size that keeps every loss inside your plan, which is the core skill tested in a prop firm challenge.