Understanding Decimal Places,
Pips and Points in Forex Trading

Forex prices are shown with several numbers after the decimal point. At first, these small digits may seem confusing. However, they simply help show small changes in a currency pair’s price.

For example, you may see:

Or:

The numbers after the decimal point help traders read price movement in smaller units. In forex, the most common terms used for these small movements are pips and points.

This article explains decimal places, pips and points in a simple way. The examples are for educational purposes only and are not live market prices.

Start with the Decimal Point

Look at this EUR/USD example:

The decimal point is the dot between the number 1 and the remaining digits.

After the decimal point, the price has five digits:

Each digit shows a smaller level of price movement.

For many currency pairs, such as EUR/USD, GBP/USD and AUD/USD, the fourth digit after the decimal point is commonly called one pip.

In the example below, focus on the fourth digit after the decimal point:

This is the traditional four-decimal format used for many forex pairs.

If EUR/USD moves from:

the price has moved by one pip.

The final digit in a five-decimal quote is even smaller. This is commonly called a fractional pip or pipette.

What is a Pip?

A pip is a standard way of describing a small price movement in a currency pair.

For many currency pairs, one pip is equal to 0.0001.

For example:

This is a one-pip movement.

Another example:

This is a five-pip movement.

The important point is simple: for most non-JPY currency pairs, look at the fourth digit after the decimal point when reading pips.

So, in this price:

the final digit, 5, represents the pip position.

Why Do Some Platforms Show Five Decimal Places?

Many forex platforms display an additional digit after the usual pip position.

For example, instead of showing:

a platform may show:

The extra final digit provides a more detailed quote.

In this format:

is not a full pip movement.

It is one-tenth of a pip.

This smaller movement is often called a pipette. Some platforms may also call it a point.

For example:

• The fourth decimal place is the pip position.
• The fifth decimal place is the fractional-pip position.

A move from 1.08450 to 1.08460 is one full pip.

A move from 1.08450 to 1.08451 is one fractional pip, or one point on platforms that use this wording.

A Simple EUR/USD Example

Let’s use this quote:

Now imagine the price changes to:

Only the final digit has changed.

This is a one-point movement on platforms where a point means the smallest displayed price movement.

Now imagine the quote changes from:

to

The fourth decimal place has changed from 5 to 6.

This is a one-pip movement.

You can think of it like this:

• 1 point = the smallest final-digit movement on a five-decimal quote.
• 10 points = one pip for many five-decimal currency-pair quotes.

This is a common platform convention, but the exact wording can differ. Always check the product details shown by your provider.

Reading Pips in GBP/USD

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

For example:

If the price changes to:

the movement is one point, or one fractional pip.

If the price changes to:

the movement is one full pip.

If the price changes from:

to

the movement is five pips.

The easiest way to read this is to focus on the fourth digit after the decimal point.

Why Japanese Yen Pairs Look Different?

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

For example:

Instead of four decimal places, JPY pairs are commonly shown with two decimal places in the traditional quote format.

For USD/JPY, one pip is commonly equal to 0.01.

For example:

This is a one-pip movement.

If the price moves from:

to

this is a five-pip movement.

The same rule applies to other pairs that include JPY, such as GBP/JPY, EUR/JPY and AUD/JPY.

Why Some JPY Quotes Have Three Decimal Places?

Many platforms show a more detailed JPY quote.

For example:

The third digit after the decimal point is the smaller fractional-pip digit.

If USD/JPY changes from:

this is one point, or one-tenth of a pip on platforms using this format.

If USD/JPY changes from:

this is one full pip.

So, the same idea applies:

• For many standard currency pairs, a pip is in the fourth decimal place.
• For many JPY pairs, a pip is in the second decimal place.
• The extra digit displayed by some platforms is commonly a fractional pip.

Pips and Points: The Easy Difference

The word “pip” is used as a common standard unit for small movements in forex prices.

The word “point” can have different meanings depending on the platform or instrument. In many five-decimal forex quotes, a point refers to the smallest final-digit movement.

For example:

A move to 1.08451 can be described as one point.

A move to 1.08460 can be described as one pip.

This is why it is important not to assume that “point” always means the same thing on every platform. Some platforms may use the word for a smallest price increment. Others may use it differently for non-forex instruments such as indices or shares.

The safest approach is to check the symbol specification, contract information or platform guide for the exact instrument you are viewing.

How Decimal Places Affect the Spread?

Decimal places are also used when reading the spread between two displayed prices.

For example:

The difference between these prices is 0.00003.

On a five-decimal quote, this is three points.

Because 10 points commonly equal one pip in this format, the spread is 0.3 pips.

Now look at another example:

The difference is 0.00010.

This is 10 points, or one pip.

Reading decimal places carefully can make it easier to understand the difference between the prices displayed on a quote screen.

A Quick Way to Read Price Movement

When you see a forex price, first identify whether the pair includes JPY.

For pairs such as EUR/USD, GBP/USD or AUD/USD, look at the fourth decimal place for the pip position.

For pairs such as USD/JPY, GBP/JPY or EUR/JPY, look at the second decimal place for the pip position.

Then check whether your platform shows one extra digit.

If it does, that extra digit is commonly a fractional pip. On many platforms, this is also called a point.

For example:

Once you recognize these positions, forex prices become much easier to read.

Common Mistakes to Avoid

One common mistake is treating every final digit as a full pip.

For example, if EUR/USD is shown with five decimal places, the final digit is usually a fractional pip, not a full pip.

Another common mistake is using the same decimal-place rule for EUR/USD and USD/JPY.

EUR/USD commonly uses four decimal places for one pip. USD/JPY commonly uses two decimal places for one pip.

It is also important to avoid assuming that the word “point” has one universal meaning. The term may depend on the platform and the instrument displayed.

Reading the contract details and quote format can help avoid confusion.