# How to know pips in forex?

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Forex trading involves the buying and selling of currencies with the aim of making a profit. In order to make accurate trades, it is important to understand the concept of pips. Pips refer to the smallest price movement that a currency pair can make. In this article, we will explore how to know pips in forex trading.

### What are Pips?

A pip is the smallest price movement that a currency pair can make. It is also known as a percentage in point or price interest point. In most currency pairs, a pip is the fourth decimal place of the exchange rate. For example, if the exchange rate for the EUR/USD currency pair is 1.1234, a pip movement would be from 1.1234 to 1.1235.

However, some currency pairs have different pip values. For example, the Japanese yen is quoted to two decimal places. In this case, a pip movement would be in the second decimal place. For example, if the exchange rate for the USD/JPY currency pair is 108.85, a pip movement would be from 108.85 to 108.86.

### Why are Pips Important?

Understanding pips is important in forex trading because it determines the profit or loss made on a trade. The value of a pip depends on the size of the position and the currency pair being traded. For example, if a trader buys 1 lot of EUR/USD, which is equal to 100,000 units of the base currency, a pip movement would be worth \$10. However, if the trader buys 1 lot of USD/JPY, which is equal to 100,000 units of the quote currency, a pip movement would be worth 1000 yen, which is approximately \$9.

### Pip value = (0.0001 / exchange rate) x trade size

For example, if a trader buys 1 lot of EUR/USD at an exchange rate of 1.1234, the pip value would be:

### Pip value = (0.0001 / 1.1234) x 100,000 = \$8.90

This means that for every pip movement in the EUR/USD currency pair, the trader would make or lose \$8.90 depending on the direction of the trade.