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# What is a Pip in Forex?

In the forex markets a pip (short for point in percentage) is a very small change in the measure of a currency pair (exchange rate). Usually a pip is $0.0001 for US Dollar exchange rates which can be referred to a 1/100th of 1%.

## An example of a pip change

As an example imagine you were offered 0.9239 for 1 Euro to Pound. If the pip increase was one-pip then the new exchange rate would be 0.9240. Pip value increases affect your investments/positions when holding currency. If you had bought used 10,000 euros to buy 9239.00 pounds (when the exchange rate was 0.9239) and the pip increased by 1, your currency portfolio would now be worth 9240.00 pounds.

## Pip value and leverage

Another factor to consider is leverage. A very important fact is that the pip value does not change based on the amount of leverage. Instead the amount of leverage affects the pip value. In summary as leverage increases

## Transaction costs of high leverage and pips

Not only does leverage amplify losses (and potentially gains) but it also increases your transaction cost(s). For example if the EURGBP exchange rates has a 5 pip spread then as leverage increases the transaction cost also increases.