How to calculate pip value in Forex?
In Forex trading, the value of a pip may be a daunting task. Hence, its a common question for Forex Newbies to ask How to calculate pip value in Forex? PIP is the unit for measuring currency change. The pip is the fourth decimal place in most pairs of currencies; for example, if the EUR / USD currency pair changes from 1.1015 to 10.1016, this change is a pip. Most brokers offer a fraction of the price of a pip, so you see the fifth decimal figure, like 1.10165, which represents half a pip.
The amount of the gain or loss depends on the conversion of one pip to the currency pair traded and also the currency with which you opened the account. The value of the pip is important because it affects the risk. If you do not know the value of a pip, you can not measure the size of an ideal Forex position for transactions, so that the risk in your trading is either too low or too high.
Calculates the value of a pip in a deal with an account that is in US dollars
Most of the currencies traded in the world are quoted in US dollars (USD). When the dollar is placed in the second (right) pair, the value of the pip is fixed and does not change, while your account is in US dollars.
The constant pip value is:
• $ 10 per standard lot equivalent to 100,000 units of currency.
• $ 1 per mini lot that equals 10,000 currencies.
• $ 0.10 per microlove equivalent to 1,000 currency units.
These pip values are applied to each currency pair in which the dollar is in the second, such as EUR / USD, GBP / USD, AUD / USD and NZD / USD.
If the dollar is not in the second part
• Divide the listed pip values by USD / XXX.
For example, to calculate the value of the pip in the USD / CAD currency pair, divide $ 10 at the USD / CAD rate when trading in an account in US dollars. If the USD / CAD rate is 1.2500, then the value of the pip is $ 8 or $ 10 per standard dollar, which should be 1.25.
Calculate the value of a pip for accounts that are in a currency other than the US dollar
Regardless of the currency of the account, when the currency is placed in the second tranche of the currency, the value of the pip is constant.
For example, if your account is in CAD (CAD), then the value of the pip is fixed for each currency pair, which is XXX / CAD (such as USD / CAD).
In this way, a standard lot is $ 10 CAD, a mini-lot is $ 1 CAD, and a microlaat is $ 0.10 CAD.
To calculate the value of the pip When the Canadian dollar is located in the first part (on the left), you must divide the fixed rate of the pip into the exchange rate; for example, to calculate the value of a pip a small lot if the exchange rate is 0.7820 = CAD / CHF , The value of a pip is $ 1.27 CAD.
If one of the currencies is JPY / JPY, then you should multiply the result by 10; for example, if the CAD / JPY price is 89.09, the standard pips value should be $ 10 CAD 89.09, then multiply the result by 10, which will be worth $ 11.23 CAD.
You must complete these steps to calculate the value of the pip account that this currency contains.
How to calculate pip value for other currency pairs
After Major currencies, it’s time to address How to calculate pip value for other currency pairs. All pairs of currencies do not include your account currency. Your account may be in USD and you intend to trade the EUR / GBP currency pair. Here’s how to calculate the value of a pair of pairs of currencies that do not include your account currency.
The second currency is always fixed, if that person has an account with that currency; for example, we know that if a person has an English pound (GBP), as per the above, the value of the EUR / GBP pound It will equal 10 GBP per standard lot. Next, you need to convert 10 GBP to your currency. If your account is in US dollars, you need to divide 10GBP by USD / GBP. If the pair rate is 0.7600, then the pips value will be 13.16 USD.
If you only have a quotation “in reverse”, such as GBP / USD at 1.3152, you will divide it by the relevant rate to get the value of 0.7600, that is, the USD / GBP rate. You can then do the above calculations.
If your currencies are euro and you want to calculate the value of the pair of AUD / CAD pairs, remember that for a CAD account, a standard lot for this currency pair is $ 10 CAD. To convert $ 10 CAD to euro, just divide it into the EUR / CAD pair rate. If the rate is 1.4813, the standard pip value will be 6.75 EUR.
Always consider which currency determines the value of a pip (second currency to the right). In this way, convert the value of your current fixed currency pip, by dividing by XXX / YYY (XXX your account currency) into your currency.
We tried to explain in full details how to calculate pip value in forex. Keep learning forex basics before investing in this market.