Pip
Pip stands for "percentage in point" and is also referred to as points. A pip is the smallest unit of price for a currency. It's the last decimal point in exchange rates or currency pairs.
If you look at the values of the currency pairs, most of the prices are quoted to the fourth decimal point in the forex market. Hence, for them the pip is 0.0001. For example, EUR/USD might be bid at 1.1914 and offered at 1.1917. In this example we can see that the spread is 3 pips wide. The Japanese Yen (JPY) is an exception. USD/JPY is quoted only to two decimal places. Hence, the pip is 0.01. By using the concept of pips, you can calculate profit/loss in forex trading.
One problem that traders face is calculation of the value of a pip. For the currency pairs with the base currency as USD, just divide a pip (mostly 0.0001) by the exchange rate. For the currency pairs with the quote currency as USD, pip value is always one pip.
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