The Meaning of Pips in Foreign Exchange

You often hear the word pips when it comes to currency trading. But have you ever wondered what are the pips and how they are calculated? The term pips means the tiniest price change. What is the smallest change is outlined by brokers and it is used in systems like Pip Android. For example, in EURUSD currency pair, the prices are shown in 4 decimal digits. That implies a pip is 0.0001. But some brokers sometimes use 5 digits, in which case a pip changes appropriately. What’s the use to add pips, you’ll wonder. Why not count profit and loss in cash without extra calculations? Well, pips permit traders to speak in same terms without revealing their real financial investments. That’s an exceedingly important aspect.