Calculating Pip value by hand in a busy market can be challenging. From platform upkeep to technical examination, it can be impractical for an active seller to take a break to determine the Pip value. Luckily, there is a tool known as Pip Calculator, which makes the task easier.
The pip calculator is a kind of forex calculator that you can use to determine the value of the pip in the currency of your account. This assists in controlling better the risk involved in the transaction.
Use of a Pip Calculator
Using a Pip Calculator is an easy process. Depending on the situation, identify the following positions in connection with trading and enter the corresponding values directly into the Pip calculator:
- Currency Pair: Many currency pairs are available, including major, minor, exotic and cross.
- Price: A price gets required for the selected pairs.
- Account medium of exchange: The base medium of exchange of the transaction account gets required for the conversion.
- Transaction position size: Estimated leverage, usually in lots or units, is a critical element of pip value. As several units in this transaction increases, the cost for each pip increases, as does the risk and reward.
- Current conversion rate: The present exchange rate between the name of the trading forex account and the counter currency of the transacted pair gets required for the conversion.
After entering the values, the Pip Benefit Calculator will help you calculate the profit you will receive before trading. In the event of a loss, the pip calculator will let you know.
The Advantage of the Pip Calculator
The pip value calculator contributes to more effective risk management. The calculation of the pip is not specific to the forex strategy. That means the traders can make use of the Pip calculator to make useful decisions regardless of the type of strategy they use for their operations in the forex market.
What is PIP?
A PIP is an abbreviation for Point in Percentage and represents a measurement unit used to change the value between currencies. PIP comes defined by moving a digit to the fourth decimal position in a distinctive forex quote.
For instance, if the EUR/USD exchange rate changes from 1.1040 to 1.1041, the profit will be $ 0.0001. The yield, in this instance, represents one PIP. Pips are usually the last decimal place in a price quote. Majority of the pairs give four decimal places, but there exist some exceptions.
For example, Japanese yen pairs (they show two decimal places). For instance, for USD / JPY it’s 0.01, while for EUR / USD it’s 0.0001.
How much is a Pip Worth?
Usually, the PIP is 0.01% or 0.0001. Let us illustrate this with an instance. Presume you are dealing with EUR/USD, one of the most traded pairs in the Forex market.
The Price is 1.2452. It moves up to 1.2458, which means that the EUR/USD has risen by six pips.
Since the listing currency or counter currency is currently the USD in currency pairs, the calculation of the PIP value is simple. In this instance, 1 PIP is $10 per standard lot. In the example above, the exchange rate of EURUSD 1.2542 means that 1 Euro is equivalent to USD 1.2542.
How many Pips is a Lot?
For a standard lot of 100,000 units, it means that 100, 000 EUR correspond to 125,420 USD. If the exchange rate changes by 1 PIP, it will become 1.2543. In case you trade a standard lot of 100,000 units, it means that you now have 125,430 USD, or in other words, you have made a profit of 10 USD.
If the USD is a counter currency or quote currency, one pip on a standard lot is always 10 USD. However, in case you trade a mini lot of 10,000 units, one pip equals 1 USD.
How is Pip Value Calculated in Foreign Exchange?
A question asked by most of the traders is, how is pip calculated? The value of the pip gets calculated by multiplying it (0.0001) by a certain lot/contract size. In place of mini lots, this is 10,000 units, of the Base Exchange and for standard lots, 100,000 units.
For instance, if you are considering EUR / USD, the pip movement in a standard contract is $ 10 (0.0001 x 100,000).
The ability to calculate the worth of a pip assists forex brokers financial services to allocate a monetary price to their profit and stop-loss goals. Instead of just analysing the movement in pips, they can regulate how the cost of their transaction account (stocks) changes as the money market moves.
It is significant to understand that the value of a pip differs in different exchange rate pairs. The reason why the cost of a pip gets always displayed in the base currency EUR/USD with the variable currency. Unlike if you trade different currency sets.
When trading EUR/USD, the pip value is displayed in USD and GBP/JPY is traded in JPY.
Pip calculator is an essential no complex instrument when it comes to forex trading. Every person who is planning to enter into forex trading business ought to learn how it operates. The pip value obtained will assist you in making an informed decision and avoiding risks warning.
With a Demo Account, you will have the best opportunity to get the practice you need before losing money when trading.
Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances or needs.
Risk Warning: Our products are traded on margin and carry a high level of risk and it is possible to lose all your capital. These products may not be suitable for everyone and you should ensure that you understand the risks involved.