Forex PIPs
Shorthand for “percentage in point.” In forex trading, a pip is the smallest incremental movement available in any currency pair. Most pips are calculated to the fourth place after the decimal point.
→ NOTE:
Pip value can be either fixed or variable depending on the currency pair.
→ EXAMPLE:
The pip value for EUR/USD is always $10 for standard lots, $1 for mini lots, and $0.10 for micro lots.
A lot is a standard unit size of a transaction. Typically, one standard lot is equal to 100,000 units of the base currency, 10,000 units if it’s a mini lot, or 1,000 units if it’s a micro lot. Some dealers offer the ability to trade in any unit size, down to as little as 1 unit.
→ HOW TO CALCULATE:
To express the value in the terms currency, multiply 1 pip with the lot value:
EURUSD pip = 0.0001 X 100,000 = $10.00
EURUSD pip = 0.0001 X 10,000 = $1.00
USDCHF pip = 0.0001 X 100,000 = SFr 10.00
USDCHF pip = 0.0001 X 10,000 = SFr 1.00
Study Guide >> Definitions and Terminology >> Forex PIP