Point is the smallest price increase in the Forex market. The English word " pip "is an abbreviation of the phrase" percentage in point "("percentage in point"). It should be remembered that earlier, for example, the exchange rate of the USD/CAD currency pair was written 1.10, but we have expanded this range, denoting it 1.1000 for the sake of measurement accuracy.
The reason why this representation is more accurate is that it allows us to show the smallest possible increment of the exchange rate change. For example, suppose the exchange rate rises from 1.1000 to 1.1001. We say that the exchange rate has increased by one point – the smallest increment of the possible change.
Point (pip) stands for "point of price interest". This is a unit of measurement that expresses the change in value between two currencies.
For example, the current price of the AUD/USD currency pair is 1.0235. If the price rises to 1.0236 or falls to 1.0234, this is a movement of 0.0001, or 1 point. Or, for example, if the current price of the USD/JPY currency pair is 81.33, then when the price rises to 81.34 or falls to 81.32, such a movement of 0.01 is a movement of 1 point.
Thus, one point is the slightest change in the price of any quote on the Forex market, regardless of whether there are two or four decimal places. Here are more examples:
- The movement of the EUR/USD currency pair up from 1.3255 to 1.3287 is a movement of 32 points.
- The movement of the EUR/USD currency pair down from 1.3255 to 1.3138 is a movement of 117 points.
- The movement of the USD/CHF currency pair up from 0.9148 to 0.9263 is a movement of 115 points.
- The movement of the USD/CHF currency pair down from 0.9148 to 0.9126 is a movement of 22 points.
- The movement of the USD/JPY currency pair up from 80.55 to 80.87 is a movement of 32 points.
- The movement of the USD/JPY currency pair down from 80.55 to 79.78 is a movement of 77 points.