Currency Pairs & Pips Explained (With Easy Examples)
Learn base vs quote, majors vs crosses, and how to calculate pip value step by step so you never misread an FX chart again.
Key Takeaways
- •Most pairs: 1 pip = 0.0001, JPY pairs: 1 pip = 0.01
- •Stick to tight-spread majors when starting out
- •Platforms show pip values automatically, but understanding helps
Pair Types
Majors
EUR/USD, GBP/USD, USD/JPY, USD/CHF, USD/CAD, AUD/USD, NZD/USD.
Crosses
Pairs without USD (e.g., EUR/GBP).
Exotics
Major + emerging currency (wider spreads).
Price Format & Pips
Most pairs: 1 pip = 0.0001
JPY pairs: 1 pip = 0.01
Example:
EUR/USD from 1.1050 to 1.1063 = 13 pips
Pip Value (Quick Method, USD Account)
For USD-quoted pairs (e.g., EUR/USD):
Micro lot (0.01)
≈ $0.10/pip
Mini (0.10)
≈ $1/pip
Standard (1.00)
≈ $10/pip
For non-USD quote:
Convert pip value to your account currency at current rate (platforms show this automatically).
Understanding Base vs Quote Currency
Example: EUR/USD 1.1050
EUR = Base currency (what you're buying/selling)
USD = Quote currency (what you're paying with)
This means 1 Euro costs 1.1050 US Dollars
Pro Tips & Common Mistakes
Pro Tips
- • Stick to tight-spread pairs early
- • Check tick size/precision in your platform
- • Most platforms auto-calculate pip values
Common Mistakes
- • Confusing pip and point
- • Forgetting JPY pip is 0.01
- • Not checking spread differences
Frequently Asked Questions
What's a fractional pip (pipette)?
One-tenth of a pip (5th decimal place or 3rd on JPY).
Why do spreads change?
Liquidity varies by session/news.
Are crosses more expensive to trade?
Often yes—wider spreads.