A basis point is a unit for expressing small percentage changes in prices, rates or yields. One basis point equals 0.01 percentage points, so 100 basis points equal one percentage point.
The unit avoids ambiguity when discussing changes between percentages. In a trading rule, a threshold stated in basis points can define the minimum prior price movement required before the strategy considers entering a market.
ELI5
A basis point is a small unit used for percentage changes. One basis point equals 0.01 percentage points, so 100 basis points equal one percentage point.
For example, if an interest rate rises from 4.00 percent to 4.25 percent, it rose by 25 basis points. The unit avoids confusion between a percentage-point change and a relative percent change.
How much is one basis point?
One basis point is 0.01 percentage points, which is 0.0001 when expressed as a decimal proportion.
How many basis points are in one percentage point?
There are 100 basis points in one percentage point, so a move from 4 percent to 5 percent is 100 basis points.
