Stock Market Glossary
Pip
Smallest usual price movement of a currency pair in Forex trading.
In brief: Smallest usual price movement of a currency pair in Forex trading.
Meaning in practice
For most major currency pairs, a pip is equal to 0.0001, for JPY pairs it is 0.01. Pips are the standard unit for calculating spreads, profits and losses in FX trading.
Context for investors and traders
For traders, this term is most useful when preparing and executing an order. Its meaning depends on the venue, liquidity, time frame and order type. A single reading is not a reliable buy or sell decision.
How to use this in practice
Use the term first to describe the situation and add verifiable data: time frame, benchmark, costs and liquidity. Only then does it become an assessment that can be connected to an investment objective and risk budget.
What to keep in mind
Avoid false precision. Many market terms describe probabilities or historical patterns; they neither guarantee a return nor replace the review of a specific security.
