You can make **profit** and **loss** calculations in the **forex market** only by knowing **pip**. The term **pip** is actually an abbreviation of **Point In Percentage**, meaning the smallest unit of exchange rate in large financial markets such as **Forex**.

Not knowing the concept of pip is definitely associated with various problems, such as the inability to correctly set the **profit** and **loss** limit or not **calculating** the amount of **profit** in terms of **pip.** One ten-thousandth of the price of a currency pair is equivalent to one pip, so the fourth number after the **decimal** point is called a **pip**. The number that comes after a pipe is called a **pipette**. The fifth digit is the next **decimal** place. The pipette is not used for profit and loss calculations.

But there is an exception in the USD/JPY currency pair. **Pip** in this currency pair is the second digit after the decimal.

**Forex trading** may get a small profit with a big move, but on the contrary, it can get a big **profit** with a small change, and pips are the only reliable method to qualitatively check the profit of trading.

For example, imagine that the current price of the EUR/USD currency pair is 1.0001, but after some time, for example, a few hours have passed, its price changes to 1.0009. found and specifies the amount of pips, we will notice that it has increased by 8 pips in the meantime.

The **valuation** of each pip is based on two factors, the amount of your **capital** in each transaction and the goods you intend to **buy** or **sell**. For example, for the trading volume of one lot in forex (capital $100,000), the value of each pip is approximately $10.