Price change, Points / pipettes, Pips and their Value

The price of an asset changes all the time during trading hours and as trading on leverage goes there is a strong and direct correlation between it and the result of your trade. The smallest fluctuations of the price of the euro vs dollar, for example, are measured up to 5 digits after the comma. The last digit is a point/ pipettes or a thousandth of a 1% market move. It takes ten points to make a pip, which is the conventional unit of measure when it comes to price variation.

Pip is an acronym for "percentage in point.” A pip is the smallest price move that an exchange rate can make based on the forex market convention. Most currency pairs are priced out to four decimal places and the pip change is the last (fourth) decimal point. A pip is thus equivalent to 1/100 of 1% or one basis point.

Base on the volume you dedicate to a given trade, the pip value will vary. Say a 1 lot trade on the EUR/USD will have a pip value of 10 USD (trading volume 100.000 x 0.0001 = 10), 2 lots make it 20 USD each pip and so on.

This will affect directly your profits or losses.