What is the difference between a pip and a point?

You will often come across the terms pip and point in financial markets. Let us clarify the relationship between these terms and their usage:

Definition
A pip, or “percentage in point”, is the basic unit of measurement of price differences, while a point is the minimum amount of price change.

For example,

The difference between 1.23234 and 1.23244 is 1 Pip.
The difference between 1.23234 and 1.23237 is 3 Points.

Pip vs point
The formula used to define the relationship between these two terms is:

1 pip = 10 points
Thus a point is 1/10th of a pip.

Pip Size
A pip size is a number that indicates the placement of the pip in a price, which for most currency pairs is a standard value of 0.0001.

For example, the pip size for EURUSD is 0.0001. This means that if we look at the price of EURUSD at any given point in time, the 4th place after the decimal point is the pip. This means the point is the 5th place.

There are currency pairs that have a pip size of 0.01, for example XAUUSD. This means that for XAUUSD, the pip is the 2nd place after the decimal point, and the point is the 3rd place.