Pip is short for “percentage in point” and is the smallest increment of trade in Forex. In the Forex market, prices are quoted to the fourth decimal point. For example, if some product in the grocery store was priced at $1.50, in the Forex market the same thing would be quoted at 1.5000. The change in that fourth decimal point is called 1 pip and is typically equal to 1/100th of 1%. Of all the major currencies, the only exception to that rule is the Japanese yen. One Japanese yen is now worth about $0.01; so, in the USD/JPY pair, the quotation is only taken out to two decimal points (i.e. to 1/100th of yen, as opposed to 1/1000th with other major currencies).