Pips vs Basis Points (bps): What Is the Difference?
Pips and basis points both look like tiny units, and both can be written as 0.0001. They are not the same thing. A pip is a fixed step of a price. A basis point (bp, plural bps) is one hundredth of one percent, a fraction of a value.
Mixing them up is easy because the numbers overlap in one special case. This guide shows where they match, where they do not, and how to convert between them with real arithmetic.
What is a pip?
A pip is the standard smallest step used to quote a price. It is a price move, not a percentage.
- Most forex pairs: 1 pip = 0.0001 (EUR/USD moving from 1.14769 to 1.14779 is 1 pip).
- Pairs quoted in yen: 1 pip = 0.01 (USD/JPY moving from 158.307 to 158.317 is 1 pip).
- Indices, metals and crypto have no official pip. This site counts a pip as the instrument’s own tick convention, for example 0.01 for gold and 1 point for NAS100 (see points vs pips).
What is a basis point?
A basis point is 0.01%, or 0.0001 written as a fraction. 100 basis points make 1%. It is used for interest rates, bond yields, credit spreads and fees, wherever a change is small compared with the value itself.
If a central bank moves its rate from 4.50% to 4.25%, the change is 0.25 percentage points, which is 25 bps. The word “basis point” always describes a change in a rate or a share of something, never a distance on a price chart.
The same price move in pips and in basis points
Here is one move measured both ways. EUR/USD rises from 1.14769 to 1.14969 (example prices).
- Price move: 1.14969 – 1.14769 = 0.0020.
- In pips: 0.0020 / 0.0001 = 20 pips.
- As a fraction of the price: 0.0020 / 1.14769 = 0.001743, which is 0.1743%.
- In basis points: 0.1743% x 100 = 17.4 bps (the same as 0.001743 x 10,000).
So the same move is 20 pips or 17.4 bps. The two numbers differ because a pip is a fixed step of the price, while a basis point is measured against the price itself.
In money, a trader holding 0.5 lots of EUR/USD earns $5 per pip (0.5 lots x $10 per pip per lot). The 20 pips are worth 20 x $5 = $100, which is 1% of a $10,000 balance. The EUR/USD pip value calculator shows this figure for any lot size.
Why 1 pip is not 1 basis point
One pip equals one basis point only when the price is exactly 1.0000, because 0.0001 / 1.0000 = 0.0001 = 1 bp. At any other price the share changes: a pip is worth fewer basis points when the price is higher.
This table divides one pip by an example price. The prices are examples, not live quotes.
| Instrument (example price) | 1 pip | 1 pip as % of price | 1 pip in bps |
|---|---|---|---|
| A pair at 1.0000 | 0.0001 | 0.01% | 1 |
| EUR/USD at 1.14769 | 0.0001 | 0.008713% | 0.8713 |
| USD/JPY at 158.307 | 0.01 | 0.006317% | 0.6317 |
| XAUUSD (gold) at 4,177.76 | 0.01 | 0.000239% | 0.0239 |
| NAS100 at 29,367.32 | 1 point | 0.003405% | 0.3405 |
For USD/JPY the working is 0.01 / 158.307 = 0.0000632, which is 0.632 bps. For gold it is 0.01 / 4,177.76 = 0.0000024, which is 0.024 bps. A “20 pip” move therefore means very different percentage moves on different instruments.
Does a rate change in bps move the price by the same number of pips?
No. A rate change in basis points and a price change in pips are two different measurements, and there is no fixed conversion between them. Here is an invented scenario to show why.
- A central bank cuts its rate by 25 bps, from 4.50% to 4.25%.
- A trader holds 0.5 lots long EUR/USD at 1.14769, with a $10,000 balance.
- After the announcement EUR/USD falls to 1.14369 (an invented reaction).
- Price move: 1.14769 – 1.14369 = 0.0040, which is 0.0040 / 0.0001 = 40 pips.
- As basis points of the price: 0.0040 / 1.14769 x 10,000 = 34.9 bps.
- Result for the trader: 40 pips x $5 per pip = $200 loss, which is 2% of the $10,000 balance.
The rate moved 25 bps, the price moved 40 pips, and that price move equals 34.9 bps of the price. Three different numbers describe one event. On another day the same 25 bps cut could move the price 10 pips or 100.
Which unit should you use?
- Use pips (or points) to place a stop loss and size a position, because your broker pays and charges per pip. The EUR/USD stop loss calculator turns a risk amount into a stop distance in pips, and the EUR/USD lot size calculator turns a stop distance into a lot size.
- Use basis points for interest rates, yields and fees, and to compare costs across instruments. A 1.0 pip spread on EUR/USD costs $10 per lot on a notional of 100,000 x 1.14769 = $114,769, which is 10 / 114,769 x 10,000 = 0.87 bps.
- Never convert one into the other without the price. Pips to bps needs the pip size and the price: bps = pips x pip size / price x 10,000.
Key facts
- 1 bp = 0.01%, and 100 bps = 1%.
- 1 pip = 0.0001 on most pairs and 0.01 on yen pairs. It is a price step, not a percentage.
- 1 pip equals 1 bp only at a price of exactly 1.0000.
- bps = pips x pip size / price x 10,000.
- A rate change in bps and a price change in pips are different measurements with no fixed link.