Pip, tick size, and pip factor

Summary

A pip is the standard unit of rate change for a currency pair, and it is pair-specific: most G11 non-JPY pairs quote to 4 decimal places (1 pip = 0.0001), JPY crosses to 2 (1 pip = 0.01). Tick size is the smallest quoting increment, stated in pips, and can vary by pair, venue, and instrument. The pip factor converts a pip count into an absolute rate move (absolute move = pips × pip factor); it must be stored as an explicit attribute of the pair because using the wrong pip factor inverts the direction of a forward premium/discount by orders of magnitude.

Detail

Pip conventions

Pair type	Convention	1 Pip	Example
Most G11 (non-JPY)	4 decimal places	0.0001	`EUR/USD`: 1.0850→1.0851
JPY crosses	2 decimal places	0.01	`USD/JPY`: 149.50→149.51

Pip decimal conventions were designed by traders to quote with minimal redundancy and avoid misreads, not chosen arbitrarily.

Tick size

The tick size is the smallest unit of change in a quotation, stated in units of pip (e.g. ½ pip, 5 pips). It can vary by pair, by trading venue, and by instrument type (spot vs forward vs option) — it is a market/venue attribute layered on top of the pip convention, not a substitute for it.

Pip factor

Converts pips into absolute rate values: absolute move = pips × pip factor.
4dp pair: pip factor = 0.0001. 2dp (JPY) pair: pip factor = 0.01.
Used everywhere forward points are quoted; applying the wrong pip factor inverts the direction of the forward premium/discount by orders of magnitude.
Sanity check: if Spot ± (forward points × pip factor) produces a negative number, the pip factor is wrong.
Must be stored as an explicit attribute of the currency pair (see Currency pair and currency entity fields), not derived implicitly from decimal_places at use time.