What is a pip in order to trade successfully, you need to understand what a pip is and how to calculate its value. A pip stands for percentage in point and is the smallest price change that a given exchange rate can make an increase or decrease in pips represents a profit or a loss in your forex trade. Let me explain further. When currencies are quoted, they are mainly quoted to the fourth decimal place. This is also true for silver and heating.

Oil exceptions are pairs that include the Japanese yen as well as commodities such as gold, oil, brent and gas, which are quoted to two decimal places. When we look at the euro US dollar pair and see it move from one-thirty, one, thirty to one thirty-one, thirty-one, it has moved one pip, because the fourth decimal point has increased by one a one: pip move for the US dollar: Japanese yen. We can see as seventy-seven sixty to seventy-seven sixty-one because the second decimal point has increased by one in major pairs quoted against the US dollar. We calculate the value of a pip as follows: the euro US dollar has an exchange rate of one thirty. One thirty: if one pip equals 0.

001, we divide 0.0001 by 130 130, which gives us a pip value of zero points: zero: zero, zero, zero, seven, six one euros: let’s turn this into a forex deal to see what the pip would represent in either a profit or Loss deal one sell 100,000 euros worth of euro US dollars at 130. 130 pip value in Euro terms is zero points: zero, zero, zero, zero 761 times 100,000 equals seven euros 61 or exactly ten dollars. If the deal is closed at one-thirty one-twenty with a ten pip profit, the total profit will be seventy-six euros ten or $ 100 deal to buy fifty thousand dollars worth of US dollars. Japanese yen, at seventy-seven, sixty pip value and dollar terms, is 0.

1 divided by seventy-seven sixty times fifty thousand equals six dollars, forty-four or exactly five hundred yen. If the deal is closed at seventy-seven, fifty with a ten pip loss, the total loss will be sixty-four dollars, forty-three or five thousand Japanese yen. It is our commitment to provide our traders with access to the best fixed, spreads and execution methods, and this is why you may at times notice additional smaller numbers at the end of a currency rate. These numbers are referred to as fractional pips and are a new pricing feature that lets you see more price action detail and helps you make more informed trading decisions. A fractional pip is 1/10 of a pip, and the addition of this feature to your account allows you to take advantage of smaller price increments and moves in the market instead of quoting prices to two or four decimals with fractional pips, we quote an extra digit, for example, normally the euro, US dollar ask, would be quoted as one thirty to fifty-one, while with fractional pips, we quote one thirty to fifty-eight with the last smaller digit representing the fractional pip earlier.

We mentioned deals of 100 thousand euros and fifty thousand dollars, which may have seen quite large, especially if you’re new to trading, but this is where an important factor comes in the use of leverage. Leverage basically means you can trade larger amounts than your initial investment view.