Pip

A unit of movement, not a unit of money. It exists so that a change in an exchange rate can be stated as a whole number in conversation and in writing, and its size is a convention of the market rather than a property of the price: one ten thousandth of the rate for most pairs, one hundredth for pairs quoted against the yen. The name is usually given as an abbreviation of percentage in point. Converting a distance in pips into an amount of money is a separate calculation, and is what pip value is for.

Most providers now quote one digit beyond the pip, the fifth decimal place on a four decimal pair and the third on a yen pair. That final digit is called a fractional pip, a pipette, or on some platforms simply a point, and ten of them make one pip. This is why a spread is routinely stated with a decimal fraction attached to it, and why a quote showing an unfamiliar number of digits is a difference in quoting precision rather than in the instrument.

The trip is treating a pip as a comparable quantity. Two pairs moving the same number of pips do not move the same amount of money, because the money value depends on the size of the contract and on the currency the rate counts in. Outside foreign exchange the unit is not defined at all: an index or a commodity contract moves in points or in ticks whose size is stated in the instrument's specification, so a distance quoted in pips on such an instrument is a loose borrowing of the word rather than a measurement.