A pip is a unit of distance, not of money. What it is worth depends on your position size and the currencies involved: on a standard lot of a dollar-quoted pair it is exactly $10, but on a cross like GBP/JPY it can be noticeably more once converted back to your account currency.
Most brokers now quote one extra digit, called a pipette or fractional pip, worth one tenth of a pip. A platform showing 1.08500 is displaying pipettes, so a "15 point" stop there is 1.5 pips, not 15.
The mistake it causes: sizing a trade on an assumed $10 a pip when the real figure is higher, which silently inflates risk on every trade.
Pip value is not always ten dollars
Almost every guide you will read assumes $10 per pip on a standard lot. That is exactly right for pairs quoted in US dollars and wrong for everything else.
| Pair | Pip size | Value per standard lot |
|---|
| EUR/USD, GBP/USD, AUD/USD | 0.0001 | $10.00 fixed |
| USD/JPY | 0.01 | 1,000 JPY, about $6.36 |
| EUR/GBP | 0.0001 | £10, about $13.27 |
| GBP/JPY | 0.01 | 1,000 JPY, about $6.36 |
A trader sizing EUR/GBP on the $10 assumption is running roughly 33% more risk than planned on every trade. Over a losing streak that difference is the gap between an uncomfortable month and a damaged account.
Pips, points and pipettes
If your platform shows five decimals on EUR/USD or three on USD/JPY, the final digit is a pipette, one tenth of a pip. MetaTrader reports results in points, which are pipettes. A "150 point" profit is 15 pips. Mixing these up produces a sizing error of exactly ten times, which is the most expensive unit confusion in retail forex.
Where pips come from
The convention exists because currencies move in tiny increments and traders needed a whole number to talk about. It has no deeper meaning: a pip is simply the fourth decimal place, chosen by convention, and the second decimal on yen pairs because the yen is quoted differently. Metals and indices do not follow the convention at all, which is why you should always confirm the per-contract figure in your own terminal before sizing gold or an index.
Use it, do not assume it
Get the live figure for your pair and account currency from the pip value calculator, then feed it into the position size calculator. Pip value is an input to sizing, and sizing is the habit that decides whether an edge ever compounds.
