Tuesday, March 1, 2016

What is PIP in Forex Trading

If you are not that familiar with the foreign currency exchange market, there might be a lot of forex trading terms which are unfamiliar to you. 

In this article, we will discuss the meaning of PIPS in forex trading. 

First of all, what is PIP? PIP, which stands for “Percentage in Point” is the “point” used for calculating the amount of profits and losses. Basically, a PIP or PIPS is 1/10,000 and is usually positioned in the 4th decimal place.

However, there is an exception to this rule. In all currency pairs involving the Japanese Yen, a pip is positioned in the 2nd decimal place, or 1/100.

So, if you want to calculate the value of a pip in a specific lot, you need to multiply it by 0.0001, because a pip is equivalent to 1/1000th of all pairs, except the Japanese Yen. 

So for example, if you are trading 10k lot of CAD/USD, you will need to multiply the 10k to 0.0001 to get the equivalent value of a pip. Doing so would get you a value of 1. That will be valued in the counter currency of the currency pair you are trading. So, that means that 1 pip is worth 1 USD for every 10k lot of CAD/USD.

Learn more about the forex market by reading our forex educational blogs and articles on a daily basis. See who the best forex brokers are, visit Wibestbroker.com to find out!

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