The basic formula
Calculate the difference between the two prices, ignore whether the move was up or down, then divide by the pip size:
pip distance = absolute value of (price 2 - price 1) / pip size
For most forex pairs, the pip size is 0.0001. For JPY pairs, it is normally 0.01. The result tells you distance, not profit or loss.
Example: EURUSD pip distance
Suppose a trader plans to buy EURUSD at 1.0850 with a stop loss at 1.0825.
(1.0850 - 1.0825) / 0.0001 = 25 pips
The stop is 25 pips away. If the take-profit target is 1.0900, the target is 50 pips from entry. That creates a 50-pip potential reward against a 25-pip risk before position size is calculated.
Example: USDJPY pip distance
JPY pairs use a different decimal convention. Suppose USDJPY moves from 150.20 to 150.85.
(150.85 - 150.20) / 0.01 = 65 pips
The price difference is 0.65, but it represents 65 pips because one pip for a JPY pair is usually 0.01. Do not divide a JPY pair by 0.0001 or the result will be 100 times too large.
Pips versus pipettes
Many platforms quote most forex pairs with five decimal places and JPY pairs with three. The extra final digit is a pipette, or one-tenth of a pip.
For example, EURUSD moving from 1.08503 to 1.08513 is one pip, not ten. The raw difference is 0.00010, which divided by the normal 0.0001 pip size equals one.
Use the full pip distance for the trade plan unless the broker requires more precise levels. Stop loss, target, and risk planning are easier to audit when they use the same unit.
Calculate the correct side of the quote
For an estimate, the displayed chart price is often enough to plan the pip distance. For a live order, remember that buying typically opens at the ask and selling typically opens at the bid. The spread can slightly change the true entry-to-stop or entry-to-target distance.
That does not mean you need to overcomplicate a planned trade. It means you should leave room for normal spread and execution variation, especially around major economic releases or at less liquid times.
Turn pip distance into a risk plan
- 1. Choose the technical entry and invalidation level. Calculate the stop distance in pips.
- 2. Set the maximum account risk. Decide the dollar amount or percentage that fits the account and daily limit.
- 3. Confirm pip value per full lot. See How to Calculate Pip Value Per Lot for that separate calculation.
- 4. Calculate the lot size. Use the pip distance, risk amount, and pip value in the free position size calculator.
- 5. Record the planned distance. Comparing planned and actual entry, stop, and exit distance makes later review more useful.
Frequently asked questions about calculating pips
How do you calculate pips in forex?
Subtract one price from the other, take the absolute value, and divide by the pair pip size. Use 0.0001 for most pairs and 0.01 for JPY pairs.
How many pips is 1.0850 to 1.0875?
The difference is 0.0025. Dividing by 0.0001 gives 25 pips.
Does pip distance tell me my dollar risk?
No. Dollar risk also depends on pip value and position size. Calculate the pip distance first, then use it with your risk amount to determine the correct lot size.