Learning To Trade Forex - Calculating Pip Values ~ Forex trading pip

Saturday, September 24, 2011

Learning To Trade Forex - Calculating Pip Values

1:38 PM

Forex Bond

Understanding pips is extremely important as a pip denotes the smallest price movement of a coin, and it is this movement which determines your profit or loss when you close your trading position.

For the most part, but not all currencies a pip is 0.0001 or 0.01%. So if a currency moves from 1.7800 to 1.7805 at a price to move 5 pips.

Forex Trading Pip

Perhaps the easiest way to understand how to calculate pip values, looking at currency pairs, with the launch of U.S.Dollars. It can be the base currency or the counter or quote currency and start considering the situation where the dollar is the currency in any quote over the U.S. dollar as in the case of EUR / USD, EUR / USD and GBP / USD.

In this case, the situation is more simple because a pip will always be worth $ 10. So, if you move the trade GBP / USD and the market in your favor by 5 pips to make a profit of $ 50. We see it in action.

Suppose that the rate of GBP / USD1.9340. This means that one British pound is worth U.S. $ 1.9340. Whereas a standard lot is 100 000 interbank this means that 100,000 British pounds worth 193 400 U.S. dollars. If the market is moving a pip, so GBP / USD 1.9341, then the UK is now worth £ 100,000 193 410 dollars - an increase of $ 10.

Now look at look at the situation where the dollar is the base currency and consider a bid of USD / GBP = 0.5170. Here $ 1 U.S. and British 0.5170 pounds worth $ 100,000They are worth $ 517 000 pounds sterling.

If the price moves up 1 pip then USD / GBP 0.5171 and £ 1 = $ 0.5171 U.S. $ 100,000 517 British and 100 pounds UK.

In this case, a movement of 1 pip represents a value of 100 British pounds, which are converted into U.S. dollars a pip value of $ 193.39 (100 ÷ 0.5171).

From this we can see that with the U.S. dollar as currency trading, a pip, a value of $ 10 for a standard trading lot, but have theThe pip value varies depending on the market price when the dollar is the base currency.

Learning To Trade Forex - Calculating Pip Values