Perhaps terms such as ” pips “, ” Point “, ” pipette ” and ” Lots ” is heard. Now we want to explain what these words mean and how to calculate their value.
Do not rush and read this information carefully, because knowledge of this information and concepts is essential for any Forex trading.
Clear your mind of Forex trading until you are fully aware of the value of a pip and do not calculate profit and loss easily.
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What is a pipe?
The unit of measurement for expressing the change in value between two currencies is called the “pip”.
If EUR / USD moves from 1.1050 to 1.1051, this is an increase of 0.0001 at the equivalent price of a pip.
The pip is usually the last decimal point of a currency pair. Of course, in brokers that price up to four decimal places.
Most currency pairs are declared up to four decimal places, but there are exceptions, such as the Japanese yen currency pair, which is up to two decimal places.
For example, for EUR / USD a pip is 0.0001 and for USD / JPY it is a pip of 0.01.
What is Pip in Forex?
What is a pipette?
Some Forex brokers quote over 2 digits and 4 decimal places in standard mode and quote their price up to 3 and 5 decimal places.
In fact, they quote a fraction of a pip , also called a “point” or “pipette.”
If the concept of a pip is not too confusing for you as a Forex trader at the moment, let us confuse you a bit and point out that “point” or “pipette” equals “one tenth of a pip”.
For example, if GBP / USD moves from 1.30542 to 1.30543, that $ 0.00001 move and increase is equivalent to a pipette.
What is Pip in Forex?
What is shown to you in Kasrpip or Point trading software is as follows:
What is Pip in Forex?
Trading software, represents the point on the right, two figures appear larger.
The following is a map of exchange rates to help you learn how to read pipes:
What is Pip in Forex?
How is the value of a pipe calculated?
Since the value of each currency is quoted relative to the other currency, it is necessary to calculate the value of each pip for the same particular currency pair.
There are various methods for calculating the value of a pipe on various sites. But many of them are really confusing.
Here we show you the easiest way to calculate the value of a pipe
In general, the value of each pip of a currency pair is equal to:
Trading volume * 0.0001 Currency
Example 1: A pip of GBP / USD with a trading volume of 10,000 is equal to:
10,000 * 0.0001 USD = 1 USD
Example 2: A pip of AUD / USD with a trading volume of 100,000 is equal to:
100,000 * 0.0001 USD = 10 USD
Example 3: A pip of USD / CHF with a trading volume of 10,000 is equal to:
10,000 * 0.0001 CHF = 1 CHF
Note: If the currency on which your account is charged is different from the opposite currency (second currency), since your profit and loss are displayed based on the base currency of your account, the amount that is piped to Convert your earnings into the base currency of your account.
So in Example 3, to get the value of the pip in dollars, we have to convert the Swiss franc into dollars.
The USD / CHF conversion rate is currently 0.9177. Therefore, the value of each Swiss franc is equal to:
1/09177 = 1,089 USD
Example 4: A pip of USD / CAD currency with a volume of 10,000 is equal to:
10,000 * 0.0001 CAD = 1 CAD
The USD / CAD exchange rate is currently 1,3305. So the value of C $ 1 is equal to:
1 / 1.3305 = 0.751 USD
You seem to be worried. ; (Do you think how hard Forex is ?!
Yes Forex is hard but not because of the pip value calculations.
Almost all Forex brokers do these calculations for you. But keep in mind that knowing how to do it is essential.
You also need to know the value of each pip of the currency pair you trade so that you can manage the risk in your account well.
If you wish you can use the Pip Value Calculator Use this link!
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