What Are Pips in Forex?
If you don’t know much about FX trading, you must be worried about some uncommon terms. Right? One of these terms is a pip. So, you must be asking yourself some questions like “what is pips forex?”.
Pip is one of the most important terms in FX trading that you must be learning before starting your career as an FX trader on tradebaionics. Because if you don’t know about pips in forex, you can lose your money instead of earning some profit for your living.
That is why we have every important information about pips in forex for you so that you can get it in the right way:
Definition of Pips in Forex
Pip stands for percentage in point or price interest point, and in easiest words, pip is the smallest or the most basic unit used for measurement in FX trading. And when we talk about different currency pairs, pip is the smallest change in two currency pairs. Pip is usually a single digit used to represent currency value change in currency pairs by moving to the fourth decimal place of the forex quote.
Suppose that you have two currencies, USD/EUR, and if they change from 1.4572 to 1.4573, then we can say that pip for this currency pair is one pip.
But do you know what the forex quote is?
Forex quote is a complicated term that many people can’t understand and eventually fail to learn FX and earn through it. But we have the easiest definition of forex quote:
“Forex quote is the price or value of a specific currency in the term of the other currency.” Got it?
How to Calculate the Value of Pip?
so now your next step is to calculate the value of a pip and read out about forex market liquidity.
To calculate pip, you must have two values, specific lot and contract size. After having both of these values, you can calculate pip by multiplying pip (0.0001) with the ratio of the specific lot and contract size. In the case of standard lots, the value of pip becomes 100,000 units of the base currency. And in the case of mini lots, this value becomes 10,000 units. It implies that if a trader buys 100,000 euros as his initial deposit, then his pip value will be $16.66. Got it? If not, then you can go through this example:
Suppose that you have a currency pair EUR/USD, then the pip value of these currency pairs must be $10 (0.0001 x 100 000).
A Pro Tip (Conclusion)
Pips are the most fundamental part of measurement while doing FX trading. If a trader or investor knows about pip, its effects, and its calculations, he becomes 20% successful. It means that your success in FX 20% depends on your understanding of pips. But here, you don’t only want to know pip’s definition and basics, but you must learn pip completely and in-detailed to earn through it. Read Now