What is PIPS?

If you are involved in forex trading operations, the most common of & # 39; a reality, you will hear a trader among friends, with a & # 39 PIPS. "Hey, I did 35 PIPS today." "Oh, I lost 22 PIPS yesterday." "Yes, I was 122 PIPS last week."

Pip – the smallest price movement in the charts. This is the last decimal place, which is usually quoted a certain rate. Pip – that's how you measure your profit or loss.

For example, if you've seen it:

1 USD = 1,1017 AUD

Then for this pair 1 Pip means 0,0001 AUD.

If the exchange rate USD / AUD moves from 1.1017 to 1.1018, this increase of one pip.

Now let's say that this is happening:

On Tuesday, 8 pm, USD / AUD = 1.1017, Wednesday 20.00, USD / AUD = 1.1044

It is a course of 27 pipsav.

1.1044 – 1.1017 = 0.0027 = 27 pips

Most currencies have four decimal places, thus one pip is 0.0001 to these currencies. Characteristic exception – USD / JPY, in which two decimals. for example:

USD / JPY = 108,48

Thus, for this pair is 0.01 1 Pip

If USD / JPY moves from 108.48 to 108.34, this is a movement in the bunch 14.

108.48 – 108.34 = 0.14 = 14 pipsav

Now this raises a key question: how do you make a profit?

If the direction of the market is moving, as you talked, you do PIPS. If the market moves in the opposite direction as you expected, you lose PIPS.

Example 1: You believe that the market will go up, and you click to buy (long position).

If the market rises and you go out for a higher price, you do PIPS. If the market instead goes, and you go at a lower price, you lose PIPS.

Example 2: Do you believe that the market will go, and you press the sell (short position).

When the market falls and you go out with a lower price, you make PIPS. If the market rises, and instead you go out for a higher price, you lose PIPS.

Now raises another question: how much money should one Pip?

Various currency pairs have different point values. Here the value of points for the 4 major currency pairs.

EUR / USD: 1 pip = $ 10 (fixed)

GBP / USD: 1 pip = $ 10 (fixed)

USD / CHF: 1 point = 8,3 USD (approximately)

USD / JPY: 1 pip = $ 9 (approximately)

Now you will notice that some currencies have a fixed pip values, while others have an approximate value of the point. Whenever USD is quoted as the counter 1 always Pip $ 10. But in the presence of a counter currency other currencies, the price point of view will change depending on the current exchange rate. Let me explain …

Forex, when you make a profit, you can always make a profit in the counter currency. For example, for USD / JPY, you make a profit in the yen (and not in USD). And so, to convert it back into US dollars, you again padvyargaetsesya the current exchange rate. That is why the value of a pip is constantly changing from time to time. The good news is that if you use the trading platform, you do not need to do the calculations. All is calculated for you automatically.

All you need to do is click to buy or sell, and all the numbers are generated for you on the platform. Is not it wonderful?