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Pip definition - Are people on forex factory abbreviating?

  • #1
  • First Post: Aug 7, 2013 8:37am Aug 7, 2013 8:37am
Everyone is my definition of 50 pips correct? my definition: (eur/usd) 1.32000->1.32050.

Do I have it wrong or are people on forex factory abbreviating when they talk about pips? For example I just read a post where someone said he set his sl on the 1 hour time frame to 50 pips. But isn't that a tiny sl? Does he mean 500 pips?

clarification appreaciated
  • #2
  • Aug 7, 2013 10:07am Aug 7, 2013 10:07am
Quoting Nilfmonkey
Everyone is my definition of 50 pips correct? my definition: (eur/usd) 1.32000->1.32050. Do I have it wrong or are people on forex factory abbreviating when they talk about pips? For example I just read a post where someone said he set his sl on the 1 hour time frame to 50 pips. But isn't that a tiny sl? Does he mean 500 pips? clarification appreaciated

a pip is 0.0001 it got confusing for people when they introduced the 5th decimal place in prices.

so 50 pip gain is 1.32000 -> 1.32500
  • #3
  • Aug 7, 2013 10:27am Aug 7, 2013 10:27am
MaxDoom summed it up well. I'm not sure exactly what you mean by "abbreviating", but pip does actually stand for "percentage in point".

The definition on Wikipedia is actually a pretty concise explanation too, and seems to touch on what is confusing you:

The major currencies, except for the Japanese yen, are traditionally priced to four decimal places. For these currencies a pip is one unit of the fourth decimal point, or 1/100th of one cent. For the Japanese yen, a pip refers to one unit in the second decimal point, because the yen is much closer in value to one hundredth of other major currencies. This would be different for the other currencies.

A pip is sometimes confused with the smallest unit of change in a quote, that is, tick size. Currency pairs are often quoted to four decimal places, but the tick size in a given market may be, for example, 5 pips, or 1/2 pip.
  • #4
  • Aug 7, 2013 10:37am Aug 7, 2013 10:37am
Pip = Price Interest Point

But I prefer:

Pitiful Incapable Punter
  • #5
  • Aug 7, 2013 8:51pm Aug 7, 2013 8:51pm
Quoting smoothmove
MaxDoom summed it up well. I'm not sure exactly what you mean by "abbreviating", but pip does actually stand for "percentage in point". The definition on Wikipedia is actually a pretty concise explanation too, and seems to touch on what is confusing you: The major currencies, except for the Japanese yen, are traditionally priced to four decimal places. For these currencies a pip is one unit of the fourth decimal point, or 1/100th of one cent. For the Japanese yen, a pip refers to one unit in the second decimal point, because the yen is much...

Hi smoothmove and maxdoom, thanks for the replies. But this is the definition I got from investopedia:
"The smallest price change that a given exchange rate can make. Since most major currency pairs are priced to four decimal places, the smallest change is that of the last decimal point - for most pairs this is the equivalent of 1/100 of one percent, or one basis point."

So according to this isn't the key that a pip is the smallest unit of price change? In pairs that are 5 decimals it would be the 5th decimal place. That would make one pip on the eur/usd = .00001 and on jpy/usd = .001

What do you think of this?

Thanks
  • #6
  • Aug 7, 2013 8:58pm Aug 7, 2013 8:58pm
I also got the same definition from babypips.com :
"The most common increment of currencies is know as the "pip." It is the smallest value change in a currency pair exchange rate. For instance, if the EUR/USD moves from 1.2250 to 1.2251, that is ONE pip. A pip is the last decimal place of a quotation."
  • #7
  • Aug 7, 2013 9:23pm Aug 7, 2013 9:23pm
Quoting Nilfmonkey
I also got the same definition from babypips.com : "The most common increment of currencies is know as the "pip." It is the smallest value change in a currency pair exchange rate. For instance, if the EUR/USD moves from 1.2250 to 1.2251, that is ONE pip. A pip is the last decimal place of a quotation."
Yes, that is right. But there are brokers that quote beyond that, i.e. they include a 5th and 3rd (for Yen) decimal, which are called pipettes. A pipette is basically a fraction of a pip.

1 pipette = 0.1 pip, 5 pipettes = 0.5 pips, etc.
  • #8
  • Aug 7, 2013 9:39pm Aug 7, 2013 9:39pm
Quoting loleno
{quote} Yes, that is right. But there are brokers that quote beyond that, i.e. they include a 5th and 3rd (for Yen) decimal, which are called pipettes. A pipette is basically a fraction of a pip. 1 pipette = 0.1 pip, 5 pipettes = 0.5 pips, etc.

I see! So it's just that my broker is different. I looked up pipette and I couldn't find it, so I guess this is trader slang? And my platform also recognizes my last decimals as "pips". So I think the definition of pip as the last decimal still holds, it's just that my pip is different from everyone else's. Thanks a lot, this has been bugging me for a while!
  • #9
  • Edited 5:33am Aug 8, 2013 12:56am | Edited 5:33am
Quoting Nilfmonkey
{quote} Hi smoothmove and maxdoom, thanks for the replies. But this is the definition I got from investopedia: "The smallest price change that a given exchange rate can make. Since most major currency pairs are priced to four decimal places, the smallest change is that of the last decimal point - for most pairs this is the equivalent of 1/100 of one percent, or one basis point." So according to this isn't the key that a pip is the smallest unit of price change? In pairs that are 5 decimals it would be the 5th decimal place. That would make one...

I think that that is a poor description, who says "1/100 of one percent" makes it hard for some to understand from the beginning.

Like I said before, things got confusing when prices started quoting at 5th decimal level.

just take the answer and don't bother with the logic.

for a 4 digit broker.......

0.0001 or 0.01 (yens etc) is a pip ie: the last decimal place = to 1/10,000th on EU for instance.

for a 5 digit broker

0.00010 or 0.010 is a pip = still worth the same
  • #10
  • Aug 9, 2013 3:13am Aug 9, 2013 3:13am
It really doesn't matter what the definition is.
What is important is the general consensus and I would think that more than 99% of traders agree that with the EURUSD 0.00010 is 1 pip and with the Japanese pairs 0.010.
There will be misunderstandings if all traders don't stick to the same values when communicating.
It doesn't help that when placing a trailing stop on MT4, it asks you to enter pips when it should be saying points.
Please Do Not PM Me With Coding Enquiries
  • #11
  • Aug 9, 2013 6:00am Aug 9, 2013 6:00am
Quoting Mingary
Pip = Price Interest Point But I prefer: Pitiful Incapable Punter
Nice, I didn't know that.
  • #12
  • May 26, 2015 11:08pm May 26, 2015 11:08pm
very important when calculating position size.
DON'T TRADE THE DIRECTION, TRADE THE MOVE
  • #13
  • Jul 4, 2015 10:59am Jul 4, 2015 10:59am
the fifth decimal place was introduced by retail brokers to sucker money from unsuspecting clients. they call this piptits.

interbank only deals in 4 decimal places and 1 pip is 0.0001 for EURUSD as an example.
  • #14
  • Last Post: Jul 4, 2015 8:08pm Jul 4, 2015 8:08pm
Quoting Nilfmonkey
Everyone is my definition of 50 pips correct? my definition: (eur/usd) 1.32000->1.32050. Do I have it wrong or are people on forex factory abbreviating when they talk about pips? For example I just read a post where someone said he set his sl on the 1 hour time frame to 50 pips. But isn't that a tiny sl? Does he mean 500 pips? clarification appreciated
Did you do Baby Pips school?

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