Educational content. This article defines what a pip is and how pip value is calculated across asset classes. It does not constitute investment advice or a trading recommendation. CFD trading carries significant risk of loss and may not be suitable for all investors.
A pip is the unit traders use to measure how far a price has moved. It is the foundational unit behind every spread quote, every stop-loss distance, and every profit-and-loss calculation in retail CFD trading. The definition is simple in forex, slightly different on gold and silver, and replaced by "points" on equity indices.
This article defines the pip across asset classes, explains the pipette (fractional pip), shows how to calculate pip value, and gives concrete examples from VantoTrade products.
What Is a Pip?
A pip is the smallest standardised price movement in a tradeable instrument. The term originally stood for "percentage in point" (or, in some older sources, "price interest point"). For most forex pairs, one pip equals 0.0001 (a movement in the fourth decimal place). For Japanese yen pairs, one pip equals 0.01 (the second decimal place). The pip is the unit used for quoting spreads, calculating stop-loss distance, and computing realised profit or loss.
Why Pip Decimal Places Differ Across Instruments
Pip decimal placement depends on the broker's quotation convention and the instrument's price scale, so a pip is not always the fourth decimal.
The general rule is that the pip sits at the smallest digit that produces meaningful market moves. For majors like EUR/USD trading near 1.16, a fourth-decimal pip (0.0001) represents roughly one hundredth of one percent, which is the right granularity. For USD/JPY trading near 150, a second-decimal pip (0.01) represents a similar percentage move, which is why JPY pairs are quoted to two decimals rather than four.
For gold (XAUUSD) trading above USD 4,000 per ounce, VantoTrade quotes to two decimals, meaning the smallest displayed move is 0.01. Most retail CFD brokers treat that 0.01 move as one pip on gold, but some platforms instead label moves on gold in "points" or apply a different decimal definition. The result is that "one pip in gold" is broker-defined rather than universal, and the only reliable way to know the convention on your account is to check the symbol specification in the trading platform.
For equity indices like DAX 40 or DXY, most platforms (including VantoTrade) use "points" rather than "pips" because the underlying is an index value rather than a currency exchange rate. The mechanics are similar (the smallest displayed move multiplied by the contract size gives the value per point), but the terminology is different.
What Is a Pipette (Fractional Pip)?
A pipette is one tenth of a pip, displayed as the fifth decimal for most forex pairs or the third decimal for JPY pairs.
Pipettes (also called "fractional pips") were introduced when electronic platforms began competing on spreads tighter than one full pip. A 0.8-pip spread cannot be displayed with four-decimal precision, so brokers added a fifth digit. Today most retail forex platforms quote five decimals on majors (three on JPY pairs), and VantoTrade follows the same convention: EUR/USD is quoted to five decimals on the platform, with the fifth digit being the pipette.
On EUR/USD quoted at 1.16156, the "6" at the end is the pipette and the "5" is the pip.
How to Calculate Pip Value
Pip value equals the pip size (e.g., 0.0001) multiplied by the contract size of one lot, expressed in the quote currency, and then converted to the account currency if different.
The general formula is:
Pip value = pip size × contract size (in units of base currency) ÷ exchange rate to account currency
For a USD-denominated account trading EUR/USD (where USD is already the quote currency), the conversion step drops out and pip value simplifies to:
Pip value (USD) = 0.0001 × 100,000 = USD 10 per standard lot
Lot size scales pip value linearly:
| Lot size | Units (base) | Pip value EUR/USD (USD account) |
|---|---|---|
| Standard | 100,000 | USD 10 |
| Mini | 10,000 | USD 1 |
| Micro | 1,000 | USD 0.10 |
If the account is denominated in a different currency, the resulting pip value is divided by the exchange rate between the quote currency and the account currency. For a EUR-denominated account trading EUR/USD, USD 10 per pip becomes approximately EUR 8.62 at an EUR/USD rate of 1.16.
Pip Value Examples Across VantoTrade Products
Pip value differs by instrument because contract size and quote convention differ.
| Symbol | Quote precision | Pip / smallest move | Contract size (1 lot) | Value per pip per standard lot |
|---|---|---|---|---|
| EURUSD | 5 decimals (pipette) | 0.0001 | 100,000 EUR | ~USD 10 |
| XAUUSD | 2 decimals | 0.01 | 100 troy ounces | USD 1 |
| DAX40 | 2 decimals | 0.01 point | 1 index unit | EUR 0.01 per point per lot (typically quoted per full point: EUR 1) |
Source: VantoTrade calculator data, snapshot 2026-05-28.
A few observations:
- A "pip" on EUR/USD (USD 10/lot) and a "pip" on XAUUSD (USD 1/lot) are not equivalent in economic terms. Position sizing must adjust for the value-per-pip difference, not just the pip count.
- On DAX 40, market participants typically refer to "points" rather than "pips". A 50-point move on DAX 40 at contract size 1 represents EUR 50 per lot.
- Live values for any symbol are visible in the trading calculator and in the MT5 symbol specification window.
Frequently Asked Questions
What does "pip" stand for?
Pip historically stood for "percentage in point", though "price interest point" is also widely used. Both refer to the smallest standardised price move in a quoted instrument; the abbreviation predates the term it now describes for most traders.
How many pips equal one US dollar in EUR/USD?
One pip on a standard EUR/USD lot (100,000 base units) is worth USD 10 when the account is denominated in US dollars. So USD 1 of profit or loss corresponds to 0.1 pips on a standard lot, 1 pip on a mini lot, or 10 pips on a micro lot.
What is one pip in gold (XAUUSD) at VantoTrade?
At VantoTrade, XAUUSD is quoted to two decimals, so the smallest displayed move is 0.01. Treating that as one pip, one pip on a standard XAUUSD lot (100 troy ounces) equals USD 1. Other brokers may use different conventions on gold, so always check the symbol specification on the account you trade.
What is the difference between a pip, a tick, and a point?
A pip is the standardised price unit on forex pairs. A tick is the minimum price increment an exchange allows (most often used on futures and equity indices). A point is the integer-level price unit on equity indices and stocks, often equal to one currency unit per contract. The three terms can refer to the same conceptual idea (smallest meaningful move) but apply to different instrument families and price scales.
How do I calculate pip value if my account is not in USD?
Calculate pip value in the quote currency first (e.g., USD 10 per pip on EUR/USD standard lot), then divide by the exchange rate between the quote currency and your account currency. For a EUR account, USD 10 ÷ 1.16 (EUR/USD rate) gives approximately EUR 8.62 per pip. Most trading platforms (MT5 included) display the converted pip value in the symbol specification.
Key Takeaways
- A pip is the smallest standardised price movement: 0.0001 for most forex pairs, 0.01 for JPY pairs, 0.01 on XAUUSD at VantoTrade.
- A pipette is one tenth of a pip and exists because brokers compete on sub-pip spreads.
- Pip value depends on pip size, contract size, lot size, and account currency.
- "Pip" terminology is most native to forex; commodities and indices often use different units (some brokers report "points" instead).
- Pip value is a mechanical computation, not a trading signal — use it for position sizing, stop-loss placement, and P&L tracking.
Apply Pip Calculations in Your Trading
To see live pip values on every VantoTrade symbol, open the trading calculator or check the symbol specification panel inside MT5. For practical context on how pip value affects position sizing on the most popular CFD products, see the how to trade gold guide, the DXY (US Dollar Index) deep-dive, and the gold-dollar correlation explainer. For a higher-level view of CFD mechanics across asset classes, the commodities trading pillar covers contract sizes, swap, and triple-swap day across the catalogue.
Risk warning. Trading securities, futures, options, and contracts for differences are complex financial instruments that require knowledge and understanding. Prices can fluctuate significantly and securities may become valueless. Investors may incur losses exceeding the potential for profits. Trading on margin can result in losses greater than the amount initially deposited. Past performance is not necessarily a guide to future performance. The information in this article is for educational purposes only and does not constitute investment advice, a recommendation, or an offer to buy or sell any financial instrument. Consider whether CFD trading is appropriate for your circumstances and seek independent advice if necessary.
