Points vs. Pips: What’s the Difference?
1 pip equals 10 points, and 1 point equals 1 pipette — that’s the core relationship on standard forex pairs. But here’s the part that actually matters in practice: “points” means something entirely different depending on what you’re trading, so you need to check which market you’re in before assuming that conversion applies at all.
The Forex Conversion
On a standard forex pair:
- 1 pip = 0.0001 (the 4th decimal place)
- 1 point = 0.00001 (the 5th decimal place) = 1 pipette
- 10 pips = 100 points
Example: USD/JPY moving from 148.200 to 148.300 is a move of 10 pips (using JPY’s 2-decimal pip convention), which is the same thing as saying it moved 100 points, since JPY pairs are typically quoted to a 3rd decimal for their pipette/point level. Same physical price move, described at two different levels of precision (a calculator built specifically for converting between the two, across different decimal-place conventions handles this automatically).
Why This Gets Confusing on Other Markets
Indices and other CFD instruments often use “points” as their own native unit, and it has nothing to do with the pip/pipette relationship above. On GER40 (the German DAX index), for example, a “point” typically just means a full 1.0 move in the index’s own price — there’s no pip involved anywhere in how that instrument is usually quoted or traded. If GER40 moves from 18,432 to 18,447, that’s described as a 15-point move, full stop — not converted into pips or pipettes at all. Points in other markets can mean something completely different from the forex definition, so always check what your specific broker and instrument actually mean by “point” before doing any conversion math between the two.
Crypto and commodity CFDs add a third variation again. Many brokers describe crypto price moves in whole-number “points” tied directly to that instrument’s own decimal precision, which may or may not line up with anything resembling the forex pip/point relationship, depending entirely on how that specific broker chose to structure the quote. There’s genuinely no shortcut that lets you skip checking each instrument category on its own terms.
The safest general habit, regardless of what you’re trading, is to stop treating “pip” and “point” as if they’re two names for one universal unit that behaves identically everywhere. They’re really instrument-specific labels, and the only way to know what either one is actually worth on a given symbol is to check that symbol’s own contract specification directly, every time you trade something new.
Why the Confusion Actually Happens
The root of the confusion is that “point” gets reused across completely different quoting systems that happen to share a word. In forex, it inherited a strict, precise relationship to the pip because both units come from the same 5-decimal quoting system. In indices and most other CFDs, “point” is just a leftover term from how the underlying futures or cash market has always been quoted, with no pip concept anywhere upstream of it to relate back to. There’s no error in either usage on its own — the mistake only happens when someone assumes one market’s definition automatically transfers to the other.
A Worked Comparison of the Two Conversions
Let’s put real numbers on both conversions side by side. On EUR/USD, a move from 1.08500 to 1.08600 is a 10-pip move, which is the same as saying 100 points (or 100 pipettes) — three names for the exact same underlying price change, since forex’s pip/point/pipette system is one unified scale.
Now compare US30 (the Dow Jones index), where a move from 39,120 to 39,220 is described simply as a 100-point move. There’s no equivalent “pip” description available at all for that move — US30’s point is its own, independently-defined smallest unit, unconnected to any pip system. Asking “how many pips did US30 move” isn’t a meaningful question the way it is for EUR/USD; the correct unit for that instrument is just points, on their own terms.
Same Word, Different Dollar Value
Because forex points and index points come from unrelated systems, their dollar values per lot are unrelated too, and there’s no shortcut formula connecting one to the other. A forex point (1/10 pip) on a standard lot is worth roughly $1. A point on an index CFD might be worth $1, $5, $10, or some other broker-specific figure entirely, depending on that instrument’s own contract specification. The word “point” tells you nothing about the dollar value until you’ve checked the actual contract details for that specific instrument — it’s a label, not a fixed unit of value the way it might feel like it should be.
How to Check What Applies to Your Instrument
- Open the Specification window for the symbol in your platform (right-click it in Market Watch).
- Look at the digits/decimal places the instrument is actually quoted with.
- If it’s a standard 4- or 5-decimal forex pair (or the JPY equivalent), the pip/point/pipette relationship above applies directly.
- If it’s an index, commodity, or crypto instrument, treat “point” as that instrument’s own smallest quoted increment rather than assuming the forex ratio carries over.
Why This Actually Matters for Risk, Not Just Vocabulary
This isn’t just a terminology nitpick — using the wrong unit definition directly breaks a position-sizing calculation. If you mistakenly treat a 50-point GER40 stop as if it were 50 forex pips and plug a forex pip value into the formula, the resulting lot size will be wrong, often by a large margin, because the actual point value for that index has nothing to do with a forex pip value. Every position-sizing calculation depends on correctly matching the unit (pip, point, or pipette) to the specific instrument’s own definition, not a generic assumption carried over from whichever market you’re more used to trading — converting that unit into an actual dollar figure is covered in Profit Per Pip and, for the raw pip-count question specifically, What Does “20 Pips” Mean in Dollars?
This is a mistake I’ve seen catch out traders who are experienced on forex but new to trading indices, precisely because “point” feels like a familiar, comfortable word from their forex background. The familiarity is actually the trap — the word carries over, but the value behind it doesn’t, and assuming it does is a fast way to size an index position wrong on your very first trade with it.
Frequently Asked Questions
Is a point always smaller than a pip?
Only within standard forex pairs, where 1 point = 1/10 pip. On indices and other instruments, “point” is defined independently and isn’t automatically smaller than anything else.
Why do JPY pairs use different decimals?
JPY pairs are quoted to 2 (or 3, for pipettes/points) decimal places instead of 4/5, because of the yen’s relative value against other currencies — the pip is still the 2nd decimal place for these pairs, it’s just positioned differently than on other majors.
Should I use pips or points when talking about indices?
Most index traders and brokers use “points,” not pips, for indices — using “pips” there can cause real confusion since the instrument doesn’t follow forex’s decimal convention at all.
Does gold use pips or points?
Gold is usually described in pips (0.01 = 1 pip), following a convention closer to forex than to indices, even though it’s a commodity rather than a currency pair. As always, check your own broker’s specification rather than assuming.