Everybody in forex talks about pips? What are these pips?

A pip is one unit of the fourth decimal point. Currency pairs are quoted to 4 (with fixed spread) or 5 (floating spread) decimal places. In other words, a pip is 0.0001 of the exchange rate. There is an exception, however, and it is the Japanese yen. For the Japanese yen, a pip refers to one unit in the second decimal point; so, it is 0.01.

Did you know there's also something called 'pipette' or 'fractional pip'? Well, some brokers offer floating spreads whereby the exchange rate is priced to 5 decimal place. The 5th digit is your pipette - 0.00001.

Forex traders make and lose pips, which depending on the amount of money invested (the size of the position) have different values. You make less money if you invest 200 dollars in a trade and make 20 pips than if you had invested 300 dollars and made the same 20 pips. The opposite is also true: you lose less if you invest 200 dollars in a trade and lose 20 pips than if you had invested 300 dollars and lost the same 20 pips.