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Forex Bond
In forex trading, you all the time hear about pips (price interest points). They are the smallest determination of a currency pair. All movements in the forex market are measured by pips, but how much money is one assuredly worth?
The good news is that your broker keeps up with all of this for you automatically, so it is not like you have to do the math each time you trade. Still, as aspiring profitable forex traders, it is all the time good to know the basics of trading, and I believe this is a basic bit of data you should understand.
Forex Trading Pip
There are a few pieces of data we have to have to rule how much a pip is worth.
First of all, we have to know how many lots of a currency pair we are trading. It makes sense that the more lots you trade, the more a pip will be worth. Let's assume for the moment that you are trading with 1 mini-lot which is 10,000 units of currency.
Let's also assume for this example, that we are trading the Eur/Usd, and we just bought it at the ask of 1.3000
The method to rule the value of 1 pip movement is:
Value = (pip / ask) * units * ask
So it would be (.0001 / 1.3000) * 10,000 * 1.3000 = . So when 1 mini-lot of Eurusd moves up 1 pip, then that means your inventory just went up .
Now here is a dinky secret. Anytime the Usd is the second part of the currency pair (or the quote currency as it is called), then the value of a pip for 1 mini-lot will all the time be .
The value of pip of 1 mini-lot of Gbpusd? .
The value of pip of 1 mini-lot of Audusd? .
And so on and so on it goes....
So what is the method for determining the value when the Usd is the first part of the currency pair?
Value = (pip / ask) * units
So the value of the Usdjpy at the ask of 87.00 pip is (.01 / 87.00) * 10,000 = .149.
This means the value of 1 price interest point movement of Usdjpy on a mini-lot is worth .15.
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