They are included in the market quote for a currency pair's exchange rate. Pips represent the change in the quote and value of a market position you may have taken. Assume you bought a currency pair for 1.1356 and sold it for 1.1360. Your trade resulted in a profit of 4 pips. The dollar value of your profit would then be determined by calculating the value of a single pip and multiplying it by your lot size.

Pips, short for "percentage in point," are a unit of measurement used in the forex market to quantify changes in currency pair prices. They represent the smallest price movement that a currency exchange rate can make. Pips are crucial for calculating profits and losses in forex trading. For currency pairs quoted to four decimal places, a pip is typically equal to 0.0001, while for those quoted to two decimal places, a pip equals 0.01. Traders use pips to assess potential gains or losses, determine entry and exit points, set stop-loss orders, and calculate position sizes based on their risk management strategy.