A pip is the smallest standard step a currency pair's price normally moves in. For most pairs it is the fourth decimal place (0.0001), for yen pairs it is the second decimal (0.01), and for gold (XAUUSD) most brokers count a pip as a 0.10 move. Traders measure profit, loss, spread, and stop distance in pips because it keeps every pair on a common scale.
If EUR/USD moves from 1.08500 to 1.08550, that is a 5-pip move. On XAUUSD, gold rising from 2400.00 to 2401.00 is a 10-pip move because each pip is 0.10.
This definition is for educational purposes only and is not financial advice. Trading involves risk.