What is a Pipette in Forex Trading?
Quick Answer: A pipette is a fractional pip - one-tenth of a pip. While a pip is the 4th decimal place for most pairs (0.0001), a pipette is the 5th decimal place (0.00001). Brokers use pipettes to offer more precise pricing and tighter spreads.
Understanding Pipettes in Forex
A pipette is a fractional pip - it's one-tenth of a pip and represents an even smaller price movement. While a pip is the 4th decimal place for most pairs, a pipette is the 5th decimal place.
Pip vs Pipette
Here's the difference:
| Currency Pair | Pip (4th decimal) | Pipette (5th decimal) |
|---|---|---|
| EUR/USD | 1.10500 → 1.10501 = 1 pip | 1.10500 → 1.10501 = 1 pipette |
| GBP/USD | 1.27350 → 1.27360 = 1 pip | 1.27350 → 1.27351 = 1 pipette |
| USD/JPY | 149.50 → 149.51 = 1 pip | 149.500 → 149.501 = 1 pipette |
Why Brokers Use Pipettes
Most modern brokers quote prices with pipettes for several reasons:
- More precise pricing - Allows finer price increments
- Tighter spreads - Can offer 0.8 pips instead of just 1 pip
- Better execution - More accurate fill prices for orders
- Competitive advantage - "1.2 pip spread" sounds better than "2 pip spread"
How Pipettes Affect Trading
For most retail traders, pipettes have minimal impact:
- Small accounts - 1 pipette ≈ $0.01 per mini lot (negligible)
- Scalpers may care - When taking 5-10 pip profits, pipettes add up
- Spread comparison - Compare brokers using full precision (1.2 vs 1.8 pips)
- Large positions - With standard lots, pipettes = $1 each
Reading Broker Quotes
When you see a price like 1.10505:
- The 1.1050 is the pip value
- The final 5 is the pipette (half a pip)
- Movement to 1.10515 = 1 pip increase
- Movement to 1.10506 = 1 pipette increase
Quick Reference
Remember: 10 pipettes = 1 pip. So if you see a spread of "12 pipettes", that's 1.2 pips. Most traders round pipettes to the nearest pip for simplicity unless scalping very small timeframes.
Learn More About Forex Trading
Now that you understand pipette, explore our comprehensive guides: