Points, Pips, and Ticks

If you’re new to trading, or even experienced but switching between forex, futures, or CFD markets, it is important to understand how price movements are measured. Terms like points, pips, and ticks are used to describe the smallest increments in price changes. However, their meaning can vary depending on the asset class or trading platform.

Let’s start with how many ticks in a point. In most futures markets, a “point” refers to a whole unit of price movement. It normally consists of several “ticks,” which are the smallest possible increments by which the price can change.

For example, in the E-mini S&P 500 futures market, one point equals four ticks. Each tick is worth 0.25 index points, and each tick is valued at $12.50, making one full point equal to $50. This structure helps traders to calculate risk and reward accurately, particularly when employing tight stops or scalping strategies.

In forex, the terminology is slightly different. The market uses pips and pipettes instead of points and ticks. However, traders shall understand how many ticks are in a point.

Why is this important? Because precision matters. If you don’t understand how much one point or tick is worth, you could easily miscalculate your position size, potential profit, or loss. In high-leverage environments, such a mistake can be costly.

Whether you're trading currencies or futures, you need to learn the language of points, pips, and ticks. It allows you to communicate clearly, execute trades with confidence, and measure performance with precision.

Pips

In the forex world, pips are the standard unit used to measure price changes between currency pairs. A pip, short for “percentage in point”, typically represents a movement of 0.0001 in most major pairs. For example, if EUR/USD moves from 1.1000 to 1.1001, it has moved one pip. However, pairs involving the Japanese yen typically use two decimal places, so a pip there is equivalent to 0.01.

Many traders also ask how pips relate to ticks, especially when they use tools like a tick-to-pip calculator. In forex trading, the smallest price increment (tick) is often a pipette, or one-tenth of a pip. So, ten ticks (or pipettes) equal one full pip. This terminology is commonly used in forex trading platforms, where prices are quoted to five decimal places, such as 1.10513.

You can use a ticks to pips calculator to compare instruments or platforms. For example, some brokers may quote in ticks, while others stick to pips. Calculators help standardize your analysis and prevent confusion, especially when you manage trades or calculate pip value in monetary terms.

Pips also help to set stop-loss and take-profit levels. For instance, a 30-pip stop on EUR/USD equates to a $30 loss on a mini lot, or $300 on a standard lot. If you understand pip value, you can better manage risk and ensure proper position sizing based on account balance and risk tolerance.

Pips are the currency market's unit of measurement for price movements. And whether you’re calculating risk or converting ticks to pips, if you understand these units, you can trade more efficiently.

Ticks

Ticks are the smallest unit of price movement in a market and are especially widely used in futures and stock trading. A tick represents the minimum change in price that can occur for a given asset. In contrast to pips in forex, ticks are more versatile and vary from one instrument to another based on the trading exchange’s rules.

One common question among traders is: How many ticks in a pip? In forex, this typically is the smallest decimal-based price movement. A tick is often considered one pipette, or one-tenth of a pip. For example, if EUR/USD moves from 1.10000 to 1.10001, that’s one tick or pipette. Therefore, ten ticks equal one pip.

In futures markets, however, the value of a tick is defined differently. For example, in crude oil futures, the minimum price movement is $0.01 per barrel, or one tick, which equals $10 per contract. In this case, pips are not used, everything revolves around ticks and points.

For traders who work across asset classes or transition between forex and futures, it is important to know the number of ticks in a pip. It helps create consistency in how you plan and manage trades. It also helps to build or adjust trading systems that rely on precision execution, such as scalping strategies.

Trading platforms often display price movements in ticks, and trading strategies might rely on tick-based triggers. If you are fluent in this unit, you can better understand such tools as tick charts, which offer an alternative to time-based analysis and can be particularly helpful in fast-moving markets.

Calculate the Pip Value on EUR/USD

If you are a forex trader, you need to know how to calculate pip value on EUR/USD. This will help you to manage risks or use leverage. Pip value tells you how much money each price movement (pip) represents based on your trade size. It helps when converting ticks to pips or comparing price movements across different instruments.

For most currency pairs, including EUR/USD, one pip equals 0.0001. To calculate the pip value for a standard lot (100,000 units), you can use the following formula: Pip Value = (0.0001 / Exchange Rate) × Lot Size Assume EUR/USD is trading at 1.1000: Pip value = (0.0001 / 1.1000) × 100,000 = $9.09 (rounded)

For a mini lot (10,000 units), the pip value would be roughly $0.91. For a micro lot (1,000 units), the cost is approximately $0.09. Most brokers and trading platforms will calculate this automatically, but if you understand the math, it gives you more control, especially when you have to manage trades across multiple pairs.

Now, how does this relate to ticks to pips? In forex, each tick (pipette) is 0.00001, and ten ticks equal one pip. Therefore, a movement from 1.10000 to 1.10010 represents a change of one full pip or ten ticks. If you know your pip value, you can easily calculate the tick value by dividing the pip value by 10.

This knowledge is very important to set stop-losses and take-profits. For example, a 20-pip stop with a $10 pip value means a $200 risk. If your system also uses tick-level entries or exits, translating pips into ticks can help refine your execution.