what is PIPS?

Pips, short for percentage in points, are the smallest unit of price movement in currency trading. In the Forex market, currencies are quoted to the fourth decimal point, with the last decimal point representing one pip. For example, if the price of EUR/USD moves from 1.2050 to 1.2051, that is a one pip movement.

Pips are used to calculate profit or loss in a currency trade. The value of a pip varies depending on the currency pair being traded, the size of the trade, and the exchange rate. In general, the value of a pip increases as the size of the trade increases. For example, if a trader buys 10,000 units of a currency pair, each pip movement will be worth ten times more than if the trader had bought only 1,000 units.

Traders often use pips to determine the level of risk they are willing to take on a trade. For example, a trader might set a stop loss order at a certain number of pips away from their entry price, in order to limit their potential losses. They might also use pips to determine their profit target, setting a target at a certain number of pips away from their entry price.

In conclusion, pips are the smallest unit of price movement in currency trading and are used to calculate profit or loss in a trade. The value of a pip varies depending on the currency pair being traded, the size of the trade, and the exchange rate. Traders often use pips to determine the level of risk they are willing to take on a trade, setting stop loss and profit target levels based on a certain number of pips.