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Pip Digits

Every currency pair in Forex has its standard number of digits after the decimal with which the market price is expressed. The number of digits after the decimal is known as the pip digit.

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The term “Pip” is an acronym that stands for “price interest point” or “percentage in point.” A pip is the standard amount a market price can move in the Forex markets. Most currency pairs are priced up to four digits past the decimal point. A price change in terms of pips is measured by the fourth digit after the decimal point.

For example, the USD/CAD currency pair’s smallest market move is $0.0001. This means that when trading this currency pair, a pip is equivalent to 1/100 of one percent or one basis point.

However, there are exceptions to the four decimal point rule. Currency pairs containing the Japanese yen (JPY) are expressed to only two decimal points. In these cases, such as the USD/JPY and EUR/JPY currency pairs, pip values are quoted as 1/100 divided by the current exchange rate. For example, if the USD/JPY is quoted as 105.41, one pip is equal to 1/100 divided by 105.41 which is 0.00009487.

The difference between the bid and ask price, otherwise known as a spread, is usually expressed in terms of pips when trading Forex.

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