When working in foreign exchange markets, for example, in the international foreign exchange market FOREX, a trader needs to know the cost of one point of change in the exchange rate. For a beginner just getting started with the trading process, quickly determining the value of a pip can be quite a daunting task.
Instructions
Step 1
A pip is the minimum step for changing the exchange rate. It is necessary to distinguish between the size of the step of changing the currency and its cost. The step size for major currency pairs such as EURUSD, GBPUSD, USDCHF, etc. is 0, 0001; for USDJPY = 0.01.
Step 2
When the value of a currency pair changes by one point, your income on an open order increases or decreases by a certain amount - this is the value of a point. The pip value changes depending on the lot size. One lot is equal to 100,000 units of the base currency. If you opened an order for the EURUSD pair in the amount of 0.1 lot (10000 units of the base currency), then a change in the rate by one point will lead to an increase or decrease in your deposit by $ 1.
Step 3
The calculation for currency pairs with direct quotation (EURUSD, GBPUSD and other currency pairs where USD is in second place) is made according to the formula: Lot size × pip size = pip value. Check the calculator for calculating the pip value for the above example; you should get: 10000 (lot size in base currency) × 0, 0001 (pip size) = $ 1.
Step 4
For pairs with a reverse quote, such as USDCHF, USDCAD, USDJPY, etc., the pip value is calculated using the formula: Lot size × pip size / current quote of the pair = pip value. Let's say you have an open order of 0.01 lot per pair. USDCAD (US dollar to Canadian dollar), rate = 1, 0067. Calculate the pip value on the calculator; you should get: 1000 (0, 01 lots) × 0, 0001/1, 0067 = 0, 0993 $.
Step 5
Make calculations for the USDJPY pair. With a lot size of 0, 1 and a rate of 76, 27, the point value will be as follows: 10000 (0, 1 lot) × 0.01 (point size) / 76, 27 = $ 1.31.
Step 6
The pip value for cross rates - that is, for such currency pairs as GBPJPY, GBPCHF, etc., is calculated by the formula: Lot size × pip size × current quote of the first currency with USD / current quote of the pair = pip value. Calculate the pip value for GBPCHF pairs with a cross-rate of 1, 4075, lot 0, 1 and a GBPUSD rate = 1, 5953. You should get: 10000 × 0, 0001 × 1, 5953/1, 4075 = 1, 1334 $.
Step 7
For a quick calculation of the pip value, use the trader's calculator:
