Glossary · How do you trade forex?Pipette
A pipette is one tenth of a pip, shown as the extra last digit of most forex quotes. On EUR/USD it is 0.00001, the fifth decimal, and on yen pairs such as USD/JPY it is 0.001. Traders also call it a fractional pip.
Most brokers quote prices to one more decimal than the pip, and that last digit counts pipettes. The pip lesson shows pips and pipettes side by side.
How to read a pipette
In EUR/USD at 1.10013, the fourth decimal is the pip digit and the fifth, the 3, is the pipette digit.
With round illustrative prices, a move from 1.10010 to 1.10013 is 3 pipettes, or 0.3 pip. On USD/JPY, a move from 150.010 to 150.015 is 5 pipettes, or 0.5 pip.
Pipettes, points and stop settings
MetaTrader calls the smallest price step a point. On a five decimal or three decimal quote, one point is one pipette, so 10 points make one pip.
That matters when you type in a distance. A stop loss 50 points from your entry is only 5 pips away.
Spreads are often shown in points as well, so a spread of 8 points on EUR/USD is 0.8 pip.
Questions
What is the difference between a pip and a pipette?
A pip is 0.0001 on most pairs and 0.01 on yen pairs. A pipette is one tenth of that, 0.00001 or 0.001.
Is a point the same as a pipette?
On five and three decimal quotes, yes: MetaTrader's point is the smallest price step, which there equals one pipette. On a four or two decimal quote, one point equals a full pip.
More terms in this chapter
Bid priceThe bid price is the price at which you can sell a currency pair right now. It is the lower of the two prices in every forex quote. You open a sell trade at the bid, and you close a buy trade at the bid.
Ask priceThe ask, or offer, is the price at which you can buy a currency pair right now. It is the higher of the two prices in every forex quote. You open a buy trade at the ask, and you close a sell trade at the ask.
Pip valuePip value is the amount of money a one pip move adds to or takes from a position. It equals the pip size times the units traded, counted in the quote currency. On one standard lot of EUR/USD in a US dollar account it is $10.
LotA lot is the standard unit of trade size in forex. One standard lot is 100,000 units of the base currency, a mini lot is 10,000 and a micro lot is 1,000. MetaTrader shows these sizes as volumes of 1.00, 0.10 and 0.01.
Market orderA market order is an instruction to buy or sell straight away at the best price available. A buy fills at the ask and a sell at the bid. You get a fast fill but not a guaranteed price, so in a fast market the fill can slip.
Pending orderA pending order is an instruction to trade later, once price reaches a level you set. Limit orders wait for a better price than now; stop orders wait for price to break through a level. Until it triggers, no position is open.
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