Forex pips are the smallest unit of price for any given currency traded on forex. For most currencies, a pip is 0.0001. The only major exception is trading USD for Japanese Yen (JPY), in which a pip is 0.01. It may seem like a tiny unit, but it can add up to a lot when you're trading in as much currency as people usually do on forex. Pips are how profits and losses are measured in the forex market, so understanding how they work is crucial to understanding your success in investing in this market.
How is Forex pip depends on what you trade. If you use USD as their currency rating, which means they are trying to buy dollars and other currency and a pip is 0.0001. But if you use USD as the base currency, which means that you sell dollars for a different type of currency, and then divide a pip (0.0001) by the exchange rate. If, for example, to sell dollars to buy Euro (EUR), and the current exchange rate is $ 1.4502 per Euro, the value of a pip is 0.000068956.
That may seem approximating a little number, but when you consider that the forex market allows you to control smaller sums in order to trade, pips can rotate into profits quickly. Say, for example, that your forex broker allows you to trade with a leverage of 100:1. This means that you can buy and sell for $100,000 with only $1,000. The more money you trade, the more you can profit from forex pips. If you trade $1,000 for EUR at the higher than exchange rate, then a pip is value $0.068956. however if you trade $100,000, then one pip is worth $6.8956. So if the worth of EUR goes losing one cent, that's 100 pips, and you just made $689.56.
