All the traders in foreign exchange market want to find these
elusive characters. They are named “pips”. What are pips and what kind
of role they play in FOREX market? One important thing to remember is
you will earn whenever you gain pips.
So What Is a Pip?
In FOREX trading, pip is a unit of measurement for the smallest change in price of the currency or currency pair. You can compare the term to unit of the measurement in stock market that is referred as “point”. Charts, which are used to trade FOREX, clearly reflect the different price levels of the currency.
With every price levels attained, it must be very simple to mathematically decide the amount of action in particular a currency expressed in pips.
Several online platforms given by FOREX brokers allow to automatically calculate the number of pips that are gained and lost in position taken by a trader.
How Much It Is Worth?
As to some major currency pairs like EUR / USD (Euro / US Dollar), if the trader commits 1 standard lot (that is equal to 100,000 units of currency traded) to trade, the movement of 1 pip in trader’s favor may yield profit of around $10. If mini lot (is equal to 10,000 units of currency traded) is used in its place, then 1 pip may have value of $1. The micro lot and the corresponding pip-value will be one tenth of mini lot.
Stated in another way, trader will predetermine value of a pip and consequently profit and loss resulting from trade just by changing number of lots that are used in trade. Greater the number of lots that is used, greater is the profit and loss.
So What Is a Pip?
In FOREX trading, pip is a unit of measurement for the smallest change in price of the currency or currency pair. You can compare the term to unit of the measurement in stock market that is referred as “point”. Charts, which are used to trade FOREX, clearly reflect the different price levels of the currency.
With every price levels attained, it must be very simple to mathematically decide the amount of action in particular a currency expressed in pips.
Several online platforms given by FOREX brokers allow to automatically calculate the number of pips that are gained and lost in position taken by a trader.
How Much It Is Worth?
As to some major currency pairs like EUR / USD (Euro / US Dollar), if the trader commits 1 standard lot (that is equal to 100,000 units of currency traded) to trade, the movement of 1 pip in trader’s favor may yield profit of around $10. If mini lot (is equal to 10,000 units of currency traded) is used in its place, then 1 pip may have value of $1. The micro lot and the corresponding pip-value will be one tenth of mini lot.
Stated in another way, trader will predetermine value of a pip and consequently profit and loss resulting from trade just by changing number of lots that are used in trade. Greater the number of lots that is used, greater is the profit and loss.
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