What’s the Difference Between a Pip and a Point?

Introduction If you’ve ever stared at a chart late at night and heard traders toss around “pip” and “point” like they have a magic code, you’re not alone. The language of markets is dense across asset classes, and the same words can mean different things depending on where you’re looking. This piece breaks down the basics, shows how the terms play out in forex, stocks, crypto, indices, options, and commodities, and maps out what it means for prop trading today and tomorrow.

Pip and Point 101 A pip is the standard unit of movement in most forex pairs. For most majors, one pip equals 0.0001 in price, while for pairs with the Japanese yen, one pip is 0.01. Think of a pip as the smallest recognizable price move that traders quote and manage risk around. A point, on the other hand, is a more general term: it’s a unit of price movement that depends on the market and contract you’re trading. In forex, some platforms use “pip” and “point” interchangeably, but in stocks, indices, and futures, a point is the native unit used to describe a move in price or value—often with a specific dollar impact per contract.

Across Asset Classes

• Forex (FX): Pip is the standard unit for most pairs; pipettes (one-tenth of a pip) exist on some platforms for finer precision. A one-pip move in EURUSD is 0.0001; on USDJPY it’s 0.01.
• Stocks: A one-point move usually means a change of $1 in price. If a stock trades at $150 and moves to $151, that’s a 1-point change.
• Crypto: Price precision varies by exchange, but traders talk in dollars and percentage moves. Some venues use “points” to describe larger price shifts, while exact tick sizes differ by coin and market.
• Indices and futures: A point is the index level or contract price unit. The monetary value per point depends on the specific contract (e.g., index futures often quote in points with a fixed dollar value per point).
• Options and commodities: In options, price is dollars per contract, with the 100-share multiplier making a $1 move worth $100 per contract. In commodities, points often align with dollars per unit of the commodity, again contract-dependent.

Practical Examples and Implications

• EURUSD moves 1.1050 to 1.1051: 1 pip.
• USDJPY moves from 110.50 to 110.60: 10 pips (a larger, but still standard, FX move for a JPY pair).
• AAPL jumps from 150.00 to 151.00: 1 point in price, which translates to $100 per standard 100-share option or stock position.
• S&P 500 futures moving 5 points: a different dollar impact than a 5-point move in a stock, because the contract size multiplies the price move into money.

Why This Matters for Prop Trading Clear unit definitions keep risk under control and sizing consistent. Knowing how many pips or points you’re risking per trade helps you set stop-loss granularity, calculate position sizes, and compare costs like spreads and commissions. Across markets, the hype around micro-lots, optimized leverage, and volatility means even small unit differences compound fast—which is why learning the exact pip/point context for each instrument matters.

DeFi, AI, and the Decentralized Frontier Go-to DeFi venues promise more permissionless liquidity and programmable strategies, but they come with liquidity fragmentation, oracle risk, and custody concerns. Smart contracts enable automated execution and risk checks, yet governance and security remain a challenge. AI-driven trading adds speed and pattern recognition, yet it must contend with data quality, model drift, and regulatory scrutiny. The trend is toward hybrid setups: centralized desks using AI and back-tested rules, complemented by vetted DeFi liquidity for diversification and hedging.

Future Trends and Takeaways

• The smart-contract era may tokenize price moves and reproduce pip/point calculations across assets with standardized risk controls.
• AI will push faster, more adaptive risk management, but traders will still need disciplined measurement, especially when markets switch liquidity sources.
• Prop trading continues to grow as a pathway for skilled traders to scale across forex, stocks, crypto, and futures, provided risk controls and transparency keep pace with innovation.

Slogan to remember What’s the difference between a pip and a point? Clarity in every tick, power in every contract.

If you’re building a practice or a desk, map your rules to the instrument you’re trading: define pip/point precisely, line up your risk per trade, and stay curious about how new venues like DeFi and AI shape the next wave of prop trading.

Support Pollinations.AI: