“PIP” stands for “Percentage In Point”.
In Forex(Fx) Market, we calculate movements in PIPs. A PIP is defined as “the smallest movement in the Exchange in between two Currencies”.
Normally, 10000th fraction of the base currency is counted as PIP. For Ex:
If we take EUR/USD and EUR/USD is at 1.3647
1/10000 = 0.0001
So, in EUR/USD, 0.0001 movement in USD is called a PIP.
But in JPY Pairs, 100th fraction is counted as PIP. For Ex:
If we take USD/JPY and USD/JPY is at 101.35
1/100 = 0.01
So, in USD/JPY, 0.01 movement in JPY is called a PIP.
This calculations are based on 4 digit brokers. But now, most of the brokers are using 5 digit calculations.
Here, “the smallest movement in between two Currencies is called Pipette”. We can see those numbers like this:
EUR/USD is at 1.36473 and
USD/JPY is at 101.354
I am not going into depth “how to calculate the value of PIP for different pairs”. Because, broker will do all the Math and you can see them straight away in their platform.