Price movements in currency pairs are often volatile and miniscule, hence, a very small unit of measurement is required to determine price movements. A pip, short for "percentage in point" or "price interest point" represents a precise measure of the movements in currency pairs in the forex market.
One pip refers to a price shift in the fourth decimal place in most currency pairs. For instance, if the EUR/USD moves from 1.2230 to 1.2231, this would indicate a price movement of 1 pip in the exchange rate