A pip, or "percentage in point," is the smallest price move that a currency pair can make in the foreign exchange (Forex) market, typically representing a one-digit change in the fourth decimal place (0.0001) for most currency pairs. In pairs that involve the Japanese yen, a pip is represented by a change in the second decimal place (0.01). Pips are crucial for traders to measure price movements and potential profits or losses, and they serve as a foundation for calculating trade sizes and risk management strategies.