Point

One word covering several units, each defined by its instrument rather than by the word. On a trading platform it is the last digit of the quote, so on a currency pair quoted to five decimal places ten points make one pip. On a stock index it is one whole unit of the index level. In older share market usage it meant one dollar of the share price. In bond and rates markets a point is one percent of face value, and a hundredth of that is a basis point. None of these is a mistake, and none can be read off the word alone.

What fixes it is the instrument's specification. The number of decimal places in the quote fixes the platform point, and the contract terms state what one point is worth in money, either as a stated amount per point on an index contract or, on a decimal quoted instrument, as the contract size multiplied by the size of that final decimal place. The consequence for costs is direct: a spread stated in points on a five decimal currency quote is ten times the same spread stated in pips, with no difference at all in what is being charged.

The confusion is therefore a costing error rather than a vocabulary one. A figure read as pips when it was quoted in points overstates the cost by a factor of ten, and the reverse understates it by the same factor, and both look plausible on the page. The other frequent slip is treating an index point as a fixed amount of money across instruments: two index contracts can move the same number of points and produce very different results, because what a point is worth is a term of each contract rather than a property of the index.