A pip is not a pip
Why the same quoted number means different money on gold, indices and yen pairs, and what to compare instead.
PropSpread ResearchAug 5, 20264 min read
The short version
- A pip is a quoting convention. Its dollar value changes with the instrument and the contract size.
- An index spread of one point tells you nothing until you know what a point is worth on that product.
- Comparing in dollars per round turn removes the unit argument entirely.
The unit moves with the instrument
A pip is a convention, not a constant. On most currency pairs it is the fourth decimal place, on pairs quoted in yen it is the second, and on gold and indices the industry usually stops saying pip at all and says point. The word survives the change of instrument. The value behind it does not.
This is how two firms can quote similar looking numbers on different instruments and mean completely different costs. Comparing the units directly is comparing labels.
The same confusion shows up one decimal further along. Many platforms quote a fifth decimal on currency pairs, which is a tenth of a pip and is often called a point or a pipette. A spread displayed as six on one platform and 0.6 on another can be the identical price, so the first thing to check on any quote screen is which unit it is counting in.
Gold, indices and points
Gold is usually quoted in cents, so a move that looks small next to a currency pair can be worth many times more per lot. Index products vary by provider in both point size and contract size, which is why an index spread of one point tells you almost nothing on its own.
The honest question is never how many pips or points the spread is. It is how many dollars one of them is worth at the size you trade, and whether the firm charges commission on that instrument as well.
Contract size is the multiplier
Pip value comes from three things: the size of one pip in the quote, the contract size of one lot, and the rate that converts the quote currency into your account currency. A standard EUR/USD lot is a hundred thousand units, which is where the familiar ten dollars per pip comes from. Change the contract size and that figure changes with it.
Metals and indices frequently use different contract sizes, so carrying the ten dollar habit across instruments quietly multiplies or divides your real risk without announcing it.
Compare in dollars
Every figure on the board is normalized to dollars per one-lot round turn for exactly this reason. It removes the unit argument: whatever the instrument quotes in, the comparison happens in the currency you are actually paid in.
Do the same in your own planning. Put the pip size, contract size and conversion rate into the pip value calculator once per instrument, and size from the dollar figure it returns.
Written by PropSpread Research. Figures referenced in this guide are indicative snapshots from connected feeds, not tradable quotes, and the arithmetic behind them is published in full in the methodology. Nothing here is financial advice.