After some other posts I got asked about pips and if I could explain it in laymen terms, and as such, well, here we go.. I'll give it a shot at least.
Pip generally refers to percentage in point, and is the lowest decimal/unit an exchange can take place at. This is typically 1/10.000 (fourth decimal point). e.g EURUSD is quoted using five decimals, but only four are significant.
A practical example: A pip spread of 2 between bid and ask for EURUSD, which happens to be the deal I have with my brokerage house, means that while purchasing/asking we quote a price of e.g. 1.46945, while at the same time the bid price is 1.46925. In this case, the 2 pips is the fee paid to the brokerage house for their services.
