A pip stands for ‘**percentage in points**’ or ‘**price in points**’. This term was traditionally the smallest price increment of a currency pair; also, it measures the amount of change in the exchange rate for a currency pair, calculated using the last decimal point. For FX majors and minors excluding JPY, a pip is the 4th decimal point (0.0001). Meanwhile, on JPY pairs, a pip is the 2nd decimal point (0.01).

A pip is also often referred to as a point and used as a reference for the size of stops and targets. For example, the trade had a 50 pip stop and a 100 pip target showing a 2:1 ratio.