How Pips Versus Points Work in Forex

What are pips and points in forex?

In forex, prices are quoted with a certain number of decimals. A pip is a conventional unit that represents a small, standardized movement in an FX pair’s quoted price. The term is widely used for performance and risk discussions because it gives a human-readable way to talk about how far price moved.

A point is a smaller increment used by a trading platform to describe price changes in its own quote format. Points are often the rawest “tick-like” unit shown by a platform, meaning the platform’s display uses a fixed step size based on how many digits it shows.

Key idea: both pips and points describe movement in the quote price, but they come from different conventions. Pips rely on forex market convention; points rely on platform quoting increments.

How pips versus points are calculated (mechanism and definitions)

To explain the mechanics clearly, start from the same place: the quoted price.

Step 1: Identify the quote format (number of decimals)

Assume an FX pair is quoted with a consistent number of decimal places. For example, some FX quotes are commonly displayed with 5 decimals, where the last digit represents the smallest visible move.

Let the current quoted price be P₁ and the later quoted price be P₂.

Step 2: Convert price movement into “points”

If your platform’s quote moves in increments of one point, then the price change is:

Δprice = P₂ − P₁
Δpoints = Δprice / (point size)

Here, “point size” means the numeric value that corresponds to one displayed point (for instance, one tenth of a pip in some 5-decimal displays). Because point definitions can be platform-specific, you should determine it from the pair’s display (e.g., how much the platform changes when the price moves by one displayed unit).

Step 3: Convert price movement into “pips”

Pip conversion is based on the pip convention for that pair. A common convention (not universal across all instruments) is:

For many major FX pairs shown with 5 decimals, 1 pip = 0.00010.
For 4-decimal displays, 1 pip = 0.0001.

So, using pip size as pip_value:

Δpips = Δprice / pip_value

Step 4: Relate pips to points

Once you have:

Δpips = Δprice / pip_value
Δpoints = Δprice / point_size

Then the relationship is:

Δpips = Δpoints × (point_size / pip_value)

This is why understanding the quote format and platform point size matters: the conversion factor changes if the number of decimals changes or if the platform defines points differently.

Worked example of converting pips versus points

Use one assumption-heavy example to show the sequence. Assume the platform displays an FX pair with 5 decimal places, and that in this display 1 pip = 0.00010.

Assume:

P₁ = 1.23456
P₂ = 1.23526

Price movement:

Δprice = 1.23526 − 1.23456 = 0.00070

Pip movement (using pip size 0.00010):

Δpips = 0.00070 / 0.00010 = 7.0 pips

Point movement (one possible platform interpretation): In many 5-decimal displays, one “point” often corresponds to 0.00001 (the smallest displayed digit). If your platform’s point size is 0.00001, then:

Δpoints = 0.00070 / 0.00001 = 70 points

Cross-check via ratio:

If 7 pips correspond to 70 points, then 10 points per pip.

Limitation of the example: this conversion uses assumed pip size and assumed point size. Your actual platform may show different decimal precision or define point size differently, which changes the numeric relationship even though the underlying price change is the same.

Turning pip/point movement into position outcomes (without assuming a result)

Pips and points describe movement of the quote price. To connect movement to what a trader sees as profit or loss, additional contract details matter.

At a high level, a platform typically computes P/L from:

The difference between entry and exit prices (in quote terms)
The position size (lots/units)
The instrument’s contract specification (how much the quote movement is worth per unit)
Any currency conversion the platform applies to present results in the account currency
Execution price, commission, and spread effects

That means you cannot infer a trading outcome from pips versus points alone.

Material limitation and failure mode: rounding and display precision

Two common ways calculations can mislead if you rely on displayed numbers:

Rounding/precision: a platform may display rounded prices while internal calculations use higher precision. This can shift the displayed pip/point count versus the exact computed value.
Provider quote rules: “point” and “pip” can be tied to different digit conventions, and different instruments (or account settings) may change the mapping.

These issues matter when you try to verify calculations independently from screenshots or summary tables.

How to verify the conversion for your pair and platform

A reader can verify the relevant facts using a controlled check:

Pick a moment when the platform shows clearly stepwise quote movement (or a small, known tick difference).
Record two consecutive displayed prices and compute Δprice.
Determine the platform’s point size by checking how much Δprice changes when the platform moves by one “point.”
Apply the pip convention for that quote format (using the pip size implied by the number of decimals shown).
Confirm that your computed Δpips matches the platform’s pip/point summary when available.

If the platform offers a “pip value” or similar metric, treat it as a convenience for contract math, but still verify the mapping between displayed points and pips with the quote format.

If you want the most practical self-check, ask: Does your platform define one point as the smallest displayed digit, or does it use a different increment? Once that is clear, pips versus points become a straightforward conversion exercise rather than a mysterious performance metric.