Pip stands for Price Interest Point, which is a unit unit to measure changes in exchange rates between two currencies. In plural English terms, "Pip" becomes "Pips".

For a currency whose value is displayed in four decimal places, one pip = 0.0001. For example, EUR / USD from the price of 1.1330 rises to 1.1335, meaning that there is an increase of 5 pips. As for the currency whose value is displayed with two decimal digits, one pip = 0.01. For example, USD / JPY from the price of 100.05 drops to 100.01, which means there is a decrease of 4 pips. When studying forex, you will find that price quotations are usually written in four decimals, except for pairs related to Japanese Yen (JPY).

However, now many brokers also offer forex pairs in the form of five decimal places (three decimal places for JPY), for example EUR / USD 1.13354 or USD / JPY 100,015. Well, in a quote like that, the last digit is not a Pips, but a Fractional Pips or Pipettes. To measure price movements, Fractional Pips cannot be counted as one complete Pip, but only one tenth of a Pip (1 Fractional Pip = 1/10 Pip). So for example if USD / JPY 100,058 goes down to 100,014, then it means a decrease of 4.4 pips, not down 44 pips.

Traders often use the term pips to show how much profit is gained or loss experienced. For example, "Just got a profit of 100 pips" or "Already 20 pips loss" and so forth.

What needs to be considered here, the actual value of how many dollars or how many rupiahs per pip can vary, depending on what currency pair, trading size (lot), and the prevailing exchange rate. Based on these three things, just fluctuating one pip can affect the amount of profit / loss in forex. Here's an example:

When trading buy USD / CAD as much as $ 200,000 (2 standard lots), then the trading position closes at 20 pips profit at the price of 1.0568. To calculate how many dollars the profit value, can be calculated by steps:

* Find the CAD value per pip by multiplying lots with the pip value: 200,000 x 0,0001 = 20 CAD per pip.

* Find the value of USD per pip by dividing the CAD value per pip by the prevailing exchange rate at the closing price: 20 x 1.0568 = 21.14 USD per pip

* Multiply the value of USD per pip by the amount of profit in the previous pips: 21.14 x 20 = Total profit of $ 422.8.

The example of calculating the actual pips value is a sample if the Dollar becomes a Base Currency in one currency pair (indicated by the position of USD in front of the pair). The calculation will be different if the Dollar becomes a Counter Currency and its position at the end of the pair, as in GBP / USD or AUD / USD. The pips value is also different if there is no USD in one currency pair, for example EUR / JPY.

However, you don't have to worry about counting manually like this. Knowledge about Pips is needed when learning forex because this includes an important basis, but in practice, today's forex brokers can do it automatically. In trading software that can be obtained from brokers, you will immediately be able to see when the trading position is closed, how many pips are obtained and how much your money is increasing. If you want to calculate just to make a trading plan or get an illustration of learning forex, you can use a forex calculator or a pips calculator that is widely available and easy to find in cyberspace.

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