What are pips in forex

Pip Calculator.

A pip is the smallest price change in a currency pair in Forex. Over the years, Forex brokers introduced fractional pips or ‘Pipettes’ to offer traders better bid and ask prices while trading, which are actually a smaller part of a pip.

To identify a pip in a currency pair, it would depend on the pair. Some pairs have their pip at the 4th decimal while some in the 2nd. The fractional pip, or Pipette, always follows the pip location, so it would be in the 5th and 3rd decimals respectively.

What is pip value?

For example, with a EURUSD price of 1.23456, the digit ‘5’ represents the pip location while the digit ‘6’ represents a partial pip. So, movement of the price by 1 pip would mean 1.23456+0.0001=1.23466.

If the price would move down to 1.23443, this would represent 1.23456-1.23443=0.00013, a 1.3 pips change.

The same calculation works with currency pairs where pips are represented by the 2nd decimal.

The pip value in Monetary value is crucial for Forex Traders as this helps to analyze and understand an account’s growth (or loss) in an easy format as well as calculate stop loss and take profit targets. For example, if you set a stop loss of 10 pips for your trade, this could mean $100 or $1000 loss, depending on the lot size you are trading.

Keep in mind that the value of pip will always differ for the different currency pairs, depending on the quote currency. For example, when trading EURUSD the pip value will be displayed in USD while trading EURGBP it will be in GBP.

How to use the pip calculator?

Account currency: your account deposit currency, can be AUD, CAD, CHF, EUR, GBP, JPY, NZD or USD.

Trade size: the trade size you are trading in lots or units, where 1 lot=100,000 units.

Once you select your account currency and the trade size, the calculator will calculate the pip value with Standard, Mini and Micro lots with the current market rates.

How to calculate the value of a pip?

Depending on your account base currency, you would need to convert the pip value accordingly.

Pip Value = (1 pip / Quote Currency Exchange Rate to Account Currency) * Lot size in units.

For example, the pip value of EURUSD is $10 per pip with a standard lot size and a USD account:

Pip Value = (0.0001 / 1)*100000 = $10.

However, if your account is denominated in EUR, you would need to divide the $10 by the EURUSD exchange rate which would result in a pip value of 8.92 EUR:

(for example, EURUSD=1.1200)

Pip Value = (0.0001 / [1.1200])*100000 = EUR 8.92.