Percentage in Point or Price Interest Point
A pip is the smallest price move that a given exchange rate makes based on market convention. Since most major currency pairs are priced to four decimal places, the smallest change is that of the last decimal point; for most pairs, this is the equivalent of 1/100 of 1%, or one basis
point. For example, the smallest move the USD/CAD currency pair usually makes is $0.0001, or one basis point.
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A pip is sometimes confused with the smallest unit of change in a quote, i.e. the tick size
. Currency pairs are often quoted to four decimal places, but the tick size in a given market may be, for example, 5 pips or 1/2 pip.
Yen-based currency pairs are an exception and are displayed to only two decimal places (0.01).
Some brokers now offer fractional pips
to provide an extra digit of precision when quoting exchange rates for certain currency pairs.