What Is A Pip Value

Category: Finance, Currency Trading.

If you are a forex trader, everything is usually about pips. It is the last decimal point in every exchange rate or currency pair.

For example, you might say, "I am up 35 pips for the day, " or, "I made 127 pips on my last trade. " Although this sounds like a lot of fun, it would probably be helpful to explain what a pip actually is. "Pip" stands for" percentage in point. " Sometimes, people also refer to pips as" points. " Basically, a pip is the smallest price unit for a currency. For most currencies, this means a pip is 000Therefore, if you bought USD/ CHF 2475 and sold at 2489, you made 14 pips. One is USD/ JPY. However, there are exceptions. This currency pair only has two decimal places so that a pip is equal to 0 Pips are very important because they are the basis by which a profit or loss is calculated. Even when you utilize different currency pairs and deal with fluctuating prices, the pip usually remains the same.

What is a Pip Value? If the USD is the base currency, you divide the pip( which is usually 0001) by the exchange rate. CHF is 2489, it goes like so: 0001/ 2489= 0000800704. If the USD is the quote currency, the pip value is always just one pip, such as 000 Therefore, if the exchange rate for USD. That probably seems like a small number, but remember that with forex trading, you can leverage small sums of money to move large amounts of currency. For example, if your broker lets you trade with leverage of 100: 1, you only need to put up$ 1000 to buy a standard lot of$ 100, 00You can see that trading in larger lots boosts the pip value so that your profit or loss is also affected, like so: If you trade on$ 1000 in currency, your pip value is calculated thusly: 0000800704 X 1000= $08 per pip.

Therefore, it is entirely possible to make a profit off of such a small number. This means that you have a profit of$ 1114. By the way. Not bad. With forex trading, you don' t invest in a single company or group of companies as you do with stocks or mutual funds, for example. You are pinning hopes on one nation's economic health versus that of another. Instead, you' re investing in a particular national economy.

Therefore, fundamental analysis is very important. When trading currencies you need to know about the countries economic situation.