You often hear the word pips when it comes to foreign exchange trading. But ever thought about what are the pips and how they are calculated? The term pips literally means the tiniest price change. What is the smallest change is defined by brokers and it’s used in programs like Pip Android. For instance, in EURUSD currency pair, the prices are shown in 4 decimal digits. That suggests a pip is 0.0001. But some brokers sometimes use 5 digits, in which case a pip changes in an appropriate way. What is the use to add pips, you can wonder. Why not count profit and loss in cash without additional calculations? Well, pips allow traders to communicate in same terms without revealing their actual monetary investments. That’s an exceedingly important aspect.