Forex Trading Basics - What Are Pips?

If you are a forex trader, everything is usually about pips. For example, you might say: "I'm up 35 pips for the day" or "I made 127 pips on my last operation."

This sounds very funny, would probably be helpful to explain what a pip.

Forex Trading Pip

"Pip" stands for "point". Sometimes people also refer to seeds as "points". Basically, a pip is the smallest unit of price for a currency. And 'the last comma in any exchange or currency riskCouple.

For most currencies, this is a pip 0.0001. Therefore, if USD / CHF 1.2475 1.2489 bought and sold, you have 14 pips.

However, there are exceptions. One thing is for USD / JPY. The currency pair has only two decimal places, so a pip is 0.01.

Signs are very important because they form the basis by which a gain or loss can be calculated.

What is a pip?

Even if you use different currency pairs, and deal with fluctuating prices, which usually pipremains the same. If the dollar is the base currency, you divide the PIP (which is usually 0.0001) by the exchange rate. If the dollar is the quote currency is the beep-beep is always only one value as 0.0001.

Therefore, if the exchange rate of 1.2489 USD.CHF, is more or less like this:

0.0001 / 1.2489 = 0.0000800704

This seems like a small number, but remember that with forex trading you can use small amounts of money to move large amounts of money. Therefore, it iseverything possible to make a profit from such a small number of dimensions.

For example, if the broker may need to trade with a leverage of 100:1, set up to only $ 1,000 to buy a standard lot of $ 100,000. You can see that trade in large amounts increases the pip value so that the income is also affected, as in:

If you are in 1000 dollars in the currency of trade, is the pip value is calculated as follows:

0.0000800704 X 1000 = $ 0.08 per pip.

This means that you have a profit of $ 112.14, notevil.

By the way ... With Forex trading, there is no need for a single company or group of companies how to invest in stocks or mutual funds, for example. Instead, you are investing in a particular economy. They have hopes of a nation's economic health than another.

Therefore, fundamental analysis is of great importance. When trading currencies, you need to know the economic situation of countries.

Forex Trading Basics - What Are Pips?

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