What Are Pips, Points and
Price Movements in Forex Trading?

Forex prices move in very small steps. When you look at a currency pair on a trading platform, you may see several numbers after the decimal point. These numbers help show even small changes in the price of one currency against another.

For example, you may see a quote like this:

A few moments later, it may change to:

This small change is called a price movement. In forex, traders often use the words pips and points to describe these movements.

At first, these words may sound technical. However, the idea is simple. A pip is a common unit used to measure a small change in a currency pair. A point is often an even smaller movement shown by the final digit on some platforms.

This article explains pips, points and price movements in simple English. All prices used below are examples only. They are not live market prices.

What is a Pip?

A pip is a common way of measuring a small movement in a forex price.

For many currency pairs, including EUR/USD, GBP/USD and AUD/USD, one pip is usually the fourth digit after the decimal point.

For example:

This is a movement of one pip.

Now look at this example:

This is a movement of four pips.

The easiest way to understand it is to look at the fourth digit after the decimal point.

In the price 1.0845, the final digit, 5, is the pip position.

In the price 1.0846, the final digit, 6, is the pip position.

When that digit changes by one, the price has moved by one pip.

A Simple EUR/USD Example

Imagine EUR/USD is shown on a platform at:

Later, the price changes to:

The price has moved by three pips.

This is because the traditional pip position has moved from 5 to 8 in the fourth decimal place.

You can read it like this:

EUR/USD moved from 1.0845 to 1.0848, which is a three-pip movement.

The final extra digit, 0, is discussed later in this article. For now, focus on the fourth decimal place when reading pips in EUR/USD.

Why Do Some Forex Quotes Show Five Decimal Places?

Many trading platforms show forex prices with five decimal places instead of four.

For example, instead of showing:

the platform may show:

The extra final digit gives a more detailed price display.

In a five-decimal quote, the fourth decimal place is still usually the pip position. The fifth decimal place shows a smaller movement than one full pip.

For example:

This is not a full pip movement.

It is one smaller price step. Many platforms call this a point. Some platforms may call it a fractional pip or pipette.

Now look at this example:

This is one full pip movement.

A simple way to remember this is:

For many five-decimal forex quotes, 10 points equal one pip.

However, platform wording can vary. Always check how your own trading platform defines points and price increments.

What is a Point in Forex Trading?

A point usually refers to the smallest price movement shown on a platform.

For many currency pairs displayed with five decimal places, the final digit represents one point.

For example:

If the quote changes to:

the price has moved by one point.

If it moves to:

the price has moved by five points.

If it moves to:

the price has moved by 10 points, which is commonly equal to one pip.

Points help platforms show price movements in more detail. They are useful when prices change by very small amounts.

The important thing is to remember that a point is often smaller than a pip. The exact way points are shown can depend on the platform and the instrument.

Pips and Points in GBP/USD

GBP/USD usually follows the same format as EUR/USD.

For example:

If the price changes to:

this is one point.

If the price changes to:

this is one pip.

If the price changes from:

to

the price has moved by five pips.

The same reading method applies to many currency pairs that do not include the Japanese yen.

You can look at the fourth decimal place to identify the pip position. The fifth decimal place is usually the smaller point position.

Why Are JPY Pairs Different?

Currency pairs that include the Japanese yen are usually displayed differently.

For example, USD/JPY may appear as:

For many JPY pairs, one pip is usually the second digit after the decimal point.

For example:

This is a movement of one pip.

If the price moves from:

to

the price has moved by five pips.

JPY pairs use a different number format because the Japanese yen has a different exchange-rate structure compared with currencies such as the euro, British pound or US dollar.

The main point is simple:

For many non-JPY pairs, one pip is in the fourth decimal place. For many JPY pairs, one pip is in the second decimal place.

Points in JPY Currency Pairs

Some platforms show JPY pairs with three decimal places.

For example:

In this format, the second decimal place is still usually the full pip position.

The third decimal place is often the smaller point position.

For example:

This is one point.

If USD/JPY moves from:

this is one full pip.

The same simple rule applies. The extra final digit gives a more detailed view of the price movement.

How to Read a Price Movement on a Platform?

When you see a forex price move, begin by checking the currency pair.

For example, if you see EUR/USD, remember that it is usually read with four decimal places for one pip. If you see USD/JPY, remember that it is usually read with two decimal places for one pip.

Then compare the earlier price with the later price.

For example:

The movement is two pips.

Now look at a JPY example:

The movement is three pips.

Reading price movement becomes easier when you focus only on the pip position for that currency pair.

Why Forex Prices Move?

Forex prices change because the relationship between two currencies changes.

Many factors can affect this relationship. These may include economic reports, interest-rate decisions, central-bank announcements, inflation data, employment figures, political developments and general market activity.

For example, EUR/USD may move when new economic information affects the euro, the US dollar or both currencies.

It is important to understand that news and market information do not provide certainty about future price movements. Forex prices can move quickly and in either direction.

Pips and points do not explain why a price has moved. They simply help measure the size of the movement.

Pips, Points and the Spread

Pips and points are also useful when reading the spread on a forex quote.

For example, a platform may show:

The difference between the sell price and buy price is three points.

Because 10 points are commonly equal to one pip in this type of quote, the spread is 0.3 pips.

Now look at this example:

The difference is 10 points, or one pip.

The spread can change depending on the currency pair, market activity, liquidity and platform pricing conditions.

A Simple Way to Remember

You do not need to memorize every number on a forex screen.

For most currency pairs such as EUR/USD and GBP/USD, focus on the fourth decimal place for one pip.

For JPY pairs such as USD/JPY and GBP/JPY, focus on the second decimal place for one pip.

If your platform shows an extra final digit, that smaller movement is often called a point.

Pips help describe larger small movements. Points help describe the smallest displayed movements.