Pip (Percentage In Point)

A fine character in Great Expectations. Check out our learning guide for more.

A "pip" just sounds small. You wouldn't name a whale "Pip." Instead, a pip sounds like the kind of name you'd give to a little dab of salt. Like...a punch of salt is made up of 10 pinches, and a pinch is made up of four pips.

In this case, a pip lives up to that tiny reputation. Only here we're talking about currency trading. Most currency pairs get priced out to four decimal places. So the British pound might be worth 1.2752 dollars. The smallest change a currency price can make is called a pip. So if the pound rose one pip, it would climb to 1.2753 versus the dollar, compared to 1.2752. An increase of 10 additional pips would take it to 1.2763. And so on.

The fourth decimal place represents the 10,000th place, for those of you familiar with 5th grade math. But, more importantly, it's 1/100 of a percent (or 1% of 1%, if you'd rather...though putting it that way can get confusing). That's where the "percentage in point" part comes from...shortened, of course, to "pip."