Forex Pips vs Points: What's the Difference?
Pips measure the smallest standard price move in forex, while points and pipettes refer to different units depending on context.
Forex Pips vs Points: What's the Difference?
"Pip" and "point" are two of the most commonly confused terms in forex. Both refer to price movement, but they mean different things — and the meaning of "point" shifts depending on the asset class. Getting them straight keeps your risk calculations accurate and your communication clear.
What Is a Pip?
A pip (percentage in point) is the standard unit of price movement for most forex pairs.
- 4-decimal pairs (EUR/USD, GBP/USD): 1 pip = 0.0001
- JPY pairs (USD/JPY, EUR/JPY): 1 pip = 0.01
A move from 1.0850 to 1.0860 on EUR/USD is 10 pips. A move from 150.00 to 150.10 on USD/JPY is also 10 pips.
What Is a Pipette?
With 5-digit pricing, brokers quote a fractional pip called a pipette:
- 5-decimal pairs: 1 pipette = 0.00001 (one-tenth of a pip)
- 3-decimal JPY pairs: 1 pipette = 0.001
EUR/USD quoted at 1.08501 has the last digit (1) as a pipette. Pipettes allow tighter spreads on ECN accounts but are not used in standard pip calculations.
What Is a Point?
"Point" is the ambiguous term. Its meaning depends on context:
- In forex — often used interchangeably with "pipette," the smallest digit on a 5-decimal price. A move from 1.08500 to 1.08510 is 10 points (or 1 pip).
- In indices and stocks — for index or stock CFDs, a point usually means a whole number. US30 moving from 38,000 to 38,010 is 10 points.
Comparison Table
| Term | Forex (4-dec) | Forex (5-dec) | Indices |
|---|---|---|---|
| Pip | 0.0001 | 0.0001 | — |
| Pipette / Point | 0.00001 | 0.00001 | 1.0 |
Why the Confusion Matters
Mixing up pips and points leads to real errors:
- Position sizing — calculating risk using points (pipettes) instead of pips makes your position size 10x too large
- Stop-loss placement — confusing units places stops far too tight or too wide
- Reporting — claiming "I made 50 points" is meaningless without defining what a point is
Standard Convention
To avoid confusion:
- Always use "pips" for forex price movement
- Reserve "points" for indices, stocks, or futures
- When a broker or trainer says "points," ask for clarification: "Do you mean pips or pipettes?"
Calculating Pips Correctly
For a 4-decimal pair like EUR/USD:
Pips = |Current Price − Entry Price| × 10,000
For a 2-decimal JPY pair like USD/JPY:
Pips = |Current Price − Entry Price| × 100
Examples
- EUR/USD moves from 1.0850 to 1.0875 → 0.0025 × 10,000 = 25 pips
- USD/JPY moves from 150.00 to 150.50 → 0.50 × 100 = 50 pips
Practical Implications
| Use Case | Unit |
|---|---|
| Risk per trade | Pips |
| Stop-loss distance | Pips |
| Profit target | Pips |
| Broker spread (raw) | Pipettes or points |
| Index movement | Points |
Speak in pips when trading forex, and confirm what someone means when they say "points."