What is pip?

What it means

On a major FX pair a pip is unambiguous — the fourth decimal place, or the second on a yen pair. Everyone means the same thing, so the word does useful work.

Why it matters

On XAUUSD it does not. Brokers quoting gold to two decimals typically treat $0.01 as a pip, which makes a pip worth $1 per standard lot. Plenty of traders, meanwhile, describe a whole $1.00 move as a pip, which makes it worth $100 per standard lot. Those two readings differ by a factor of one hundred, and both are in daily use.

What this changes in practice

The safest habit is to stop using the word on gold and think in dollars of price movement instead. That is what our engine does internally — stops, targets and the spread guard are all expressed in dollars, never pips — and it is why the pip value calculator shows both conventions rather than picking one and being wrong for half its users.