ðWhat is a Pip?
The unit of measurement to express the change in value between two currencies is called a âpip.â
If EUR/USD moves from 1.1050 to 1.1051, that .0001 USD rise in value is ONE PIP.
A pip is usually the last decimal place of a price quote.
Most pairs go out to 4 decimal places, but there are some exceptions like Japanese yen pairs (they go out to two decimal places).
For example, for EUR/USD, it is 0.0001, and for USD/JPY, it is 0.01.
ðWhat is a Pipette?
There are forex brokers that quote currency pairs beyond the standard â4 and 2â decimal places to â5 and 3â decimal places.
They are quoting FRACTIONAL PIPS, also called âpointsâ or âpipettesâ which equal a 10th of a pip.
ðHow to Calculate Pip Value:
ðThe value of pip depends on the following three factors:
âïļThe quoted currency
âïļThe volume of the trade
âïļAnd the exchange rate
Based on these factors the fluctuation of even a single pip can have a significant impact on the value of the open position.
The value of 1 pip is calculated by the following formula:
The value of 1 pip = (Pip in decimal places * Trade Volume)
ðExample:
1 pip volume in EUR/USD is equal to 0.0001
Then 1 PIP VALUE equals:
100,000 EURâ> 100,000*0.0001= 10 USD
10,000 EURâ> 10,000*0.0001= 1 USD
1,000 EURâ> 1,000*0.0001= 0.1 USD
100 EURâ> 100*0.0001= 0.01 USD
â Tell us about issues you had with pips value calculation/understanding in the beginning of your traderâs journey in the commentsâ
ðAnd See you next timeð
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