How To Understand Pips In Forex

Welcome to the forex world! If you’re new to trading, it’s normal to feel a bit overwhelmed by all the jargon and terminology that comes with it. One of the most important terms you’ll come across is “pips.” Understanding what they are and how they work can make a significant difference in your success as a trader.

In this blog post, we’ll break down everything you need to know about pips and why they matter in forex trading. So let’s get started!

What are pips in forex?

Pips in forex represent the smallest amount of currency that a foreign exchange trader can buy or sell. When you see pips, it means that the price of a specific currency is fluctuating relatively rapidly. The way that forex traders measure the value of a currency is by paying attention to the number of pips (or points) that trade hands each day.

How To Understand Pips In Forex
How To Understand Pips In Forex

How to use pips in forex trading

Pips, or pennies per point, are a unit of measurement used in forex trading. They indicate the difference between two price levels and are most commonly used when comparing the prices of two cryptocurrencies.

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When to use pips in forex trading

Forex traders use pips (point/percentage changes) to measure price movements in the foreign exchange market. When making a decision, forex traders will compare the current pip value to the previous pip value in order to determine if there has been a significant change in price.

If you are just starting out trading Forex, it is recommended that you learn how to read and understand pips. Pips can be confusing at first, but with practice they become second nature. Keep in mind that pips are not always reliable indicators of future price movement and should not be used as the only source of information when making trading decisions.


Forex trading can be a confusing and complex process, but understanding pips is essential to making sound decisions. Pips are simply fluctuations in the price of a currency that occur due to supply and demand. By understanding how pips work, you can use this information to your advantage when trading forex.

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