If you have opened a forex chart and noticed that prices are quoted to five decimal places rather than four, you have encountered pipettes. This lesson is short because the concept is simple — but it is worth covering clearly because the five-digit price format confuses many beginners who expect four decimal places based on the pip definition they just learned.
What Is a Pipette?
A pipette is one tenth of a pip. For most currency pairs, where one pip is the fourth decimal place (0.0001), one pipette is the fifth decimal place (0.00001). For JPY pairs, where one pip is the second decimal place (0.01), one pipette is the third decimal place (0.001).
EUR/USD quoted at: 1.08507 The breakdown: 1 = 1 unit of EUR .08 = cents .085 = tenths of cents .0850 = pips (4th decimal) .08507 = pipettes (5th decimal) The 7 at the end is 7 pipettes — or 0.7 pips.
Why Brokers Use 5 Decimal Places
Five-digit pricing became standard as interbank pricing technology improved and competition between brokers intensified. More decimal places allow for finer pricing — a broker can quote a spread of 0.8 pips rather than being forced to round to 1 pip. This benefits the trader by reducing the cost of each trade slightly, and benefits the broker by allowing more precise aggregation of the prices it receives from liquidity providers.
Five-digit pricing does not change how you trade or how you think about pips. A 50-pip stop loss is still 50 pips whether your broker shows you 4 or 5 decimal places. Simply ignore the fifth digit when thinking about pip distances.
Fractional Pip Spreads
The practical consequence of five-digit pricing is that spreads are often quoted as fractional pips. A broker advertising a 0.8 pip spread on EUR/USD is showing you a spread of 8 pipettes — slightly less than one full pip. This is genuinely tighter pricing than a 1-pip spread, and the difference adds up on active trading accounts over time.
Broker A (4-digit): EUR/USD spread = 1 pip ($10 per lot) Broker B (5-digit): EUR/USD spread = 0.8 pips ($8 per lot) Over 100 trades at 1 standard lot: Broker A cost: $1,000 Broker B cost: $800 Saving: $200 (20%)
Does It Matter for Your Trading?
For practical trading purposes, pipettes rarely change anything about how you operate. You will still set stop losses in pip distances, calculate position sizes in pips, and measure trade outcomes in pips. The fifth decimal place is relevant primarily when comparing broker spreads — where a 0.8 pip spread is meaningfully better than a 1.0 pip spread — and when reading price precisely on extremely short timeframes.
One potential source of confusion: when you set a stop loss or take profit in MT4, the platform uses pips by default but may display in pipettes. Check your platform settings — MT4 has a configuration option for whether distance inputs are in pips or pipettes. Setting this correctly prevents the common mistake of setting a 50-point stop when you intended 50 pips.