# How to calculate a pip value in monetary terms,

The pip value is always determined in terms of the quote currency or the second currency in the pair.  It is then converted to the currency of your account denomination.This can be done using the current currency price or the exchange rate in case the account denomination is different from the base currency.

### Factors considered to calculate the pip value in monetary terms

To calculate the pip monetary value in your account denomination, we need to first know the following;

• The quote or the second currency in the pair
• value of the a pip using the quote currency.
• The size of the lot/contract in the base currency e.g for a standard account, 1 pip (0.0001) = 100000 units,10000 units for a mini and 1000 units; for a micro.
• Current price of currency pair or exchange rate.
• Minimum pip value in decimal places.

Pro tip: It is the quote currency that determines the pip monetary value.

Formula;

1 Pip = (pip value in decimal places × trade size in units)/exchange rate.

The pip monetary value for the quote currency will always be  \$10, \$1 or  \$0.1 depending on the size you are using to trade for currencies whose pairs are quoted to 4 decimal places with an exception of currencies quoted with a Yen.

The Yen pairs will take up values of \$1000, \$100,\$10.

### When your account capital is in USD

If you are trading a pair having a USD as a quote currency, the pip monetary value would  be \$10,\$1,\$0.1 according to the size you are using.

Some of these pairs may include, EUR/USD, GBP/USD,NZD/USD, AUD/USD.

This simply means if the second currency of a pair is the same as the currency on our trading account, the pip value is equal to that for a standard pip value which varies according to the size used to trade.

If the USD is not the counter currency but the base currency, we divide the standard pip value by the given exchange rate. Quite confusing, right?, Lets look at the examples below.

For instance if we were trading the USD/CHF at 0.9780 using your USD account trading a standard account;

Pip value =  Standard pip value(\$)/exchange rate(price)

Remember, for a standard account (100000) 1 pip = \$10,

Therefore,  pip value =      10/0.9780

= \$10.22

When the USD is not traded in the pair.

For instance EUR/JPY  at 113.080 (exchange rate) using your USD account  standard account

Remember, 1 pip = 0.01 for Yen pairs

Therefore Standard pip value is =   (100,000 units× 0.01) = \$1000

Pip value(in Euros)  =  Standard pip value(\$)/exchange rate(price)

= 1000/113.080

=8.84Euros.

Since your account is in USD, You have to convert  the Euros to USD . Guess how to do that! Simple, we now look at the EUR/USD rate.

Assuming the rate is at 1.17855, to get pip value, we simply multiply by the exchange rate

Therefore, pip value (in USD)= (8.84 × 1.17855)

= \$10.4

### When your account capital is not in USD; in EUR

Take note, we are assuming our account is a mini account in this example

If the quote currency is in USD, and base currency is same as the account denomination ( in this case the EUR).

This simply means the pair you are trading is EURUSD. Assuming exchange rate price is at 1.1735

Since our account is mini,  1 pip (\$) = 0.0001 x 10,000 units = \$1

There fore, Pip value (in Euros) = mini pip value(\$)/exchange rate(price)

pip value = 1/1.1735

=0.852 Euros each pip moved.

Suppose you had a buy at the same price  1.1735 and price moved against you and hit a stop loss at 1.1720, your trade would have made a loss of 15 pips.

To get the value terms of the base currency; you simply multiply the value per pip and the number of pips moved by the trade.

For our case we shall have; (0.852 × 15) = €12.78.

Likewise if we had made a profit of 100 pips, our profit in the base currency would be;

(0.852 × 100 ) = €85.2.

#### For pairs quoted with the Yen

To calculate pip value for pairs quoted with a Yen, follow the same procedures but bare this in mind that Yen pairs are quoted either to the 2nd or 3rd decimal places.  This implies that the standard pip values will be  \$1000 for standard account,\$100 for a mini account and \$10 for a micro.

So if we use USD/JPY at 112.86, a our example now.This is how the mathematics would be;

For a standard account,   1000/112.86

For mini,                            100/112.86

For micro,                             10/112.86

### How to calculate pip value  if your account is in your local currency?

Here we assuming your local currency  is not in the currency pair you are trading. Assuming our account is in EUR

let’s consider the examples below.

Example 1

Suppose we are trading  USD/CAD standard size at a rate of 1.24511.

Remember, for a standard account (100000) 1 pip = \$10,

Pipvalue =( 10/1.24511)

= \$8.03

Since your account is in EUR, You have to convert  the USD to Euros .

How do you do that? Ans: EUR/USD exchange rate

Assuming the EUR/USD exchange rate at 1.17855

Pip value in Euros  = pip value(\$)/price

= (8.03/1.17855)

=6.8 euros.

Example 2

If we are trading  GBP/JPY trading a standard account (100000) at 149.000.

Remember, for a standard account pip value for Yen is at \$1000 (100,000× 0.01)

Pip value (in GBP)= 1000/149.000

=6.71 GBP

Since your account is in EUR, You have to convert  the GBP to Euros .

Atleast now you know how to that! EUR/GBP exchange rate!

Assuming the EUR/GBP exchange rate at 0.89235

Pip value in Euros  = pip value(pounds)/price

(6.71/0.89235)

=7.52 euros.

That was such a huge long session of calculations. We are here to remind you that, you don’t have to go through that to determine the pip value for your trades each time you are to enter a trade. Some one is saying “thanks to God.” Woow! it was made easy due to technology. You can use a free pip calculator online to calculate the pip value.

Some brokers give a provision of on the platform or show pip values on the platform.  Which ever currency you are using, you don’t have to worry. Everything is always done for you, you only deposit money and trade.

But if your are a ‘math-holic’ and always wondering how those values are arrived at you can take the formulas and follow the procedures given above.

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