What is a pip?
A pip is a fraction in which a currency exchange rate is said to move, although currencies can actually move in fractions of pips. In the case of most foreign currency pairs, this is 0.0001, as values are given to the fourth decimal point.
Where have you heard about pips?
As pips are the standard unit of change in foreign exchange markets, you may have heard of them in relation to the changing values of major currencies. This could be, for example, a change of 30 pips in the value of the US dollar against the Canadian dollar.
What you need to know about pips...
'Pip' stands for price interest point. Although in the case of most currencies, this is measured as one point of the fourth decimal place, in the case of the Japanese yen it is one point of the second decimal point as the yen is closer in value to one hundredth of other major currency values.
As an example, both the US dollar and the euro are measured to the fourth decimal point. So if the euro trades at 1.0040 against the dollar but then the rate changes to 1.0048, this is a change of eight pips.