Inside the Currency Market: Mechanics, Valuation, and Strategies

Pips and Lots

Spot-currency trading is conducted through pips. A pip is a percentage interest point. A 100 pip move up or down in any currency pair equates to one penny, a common occurrence on any given trading day. The market term for a 100 pip move is a Big Figure, slang is big fig. Just like a Milliard is equal to one billion units of currency, the market term is Yard to equal a billion units.

The value of a pip depends on the type of lot traded. A standard lot equates to control of 100,000 currencies; it is one one-hundredth of a point, one basis point, or $10 per pip. For most pairs, this is found in the fourth decimal place, second decimal place for the Japanese yen. For example, British pound/U.S. dollar is the British pound sterling versus ...