The Pip Calculator
Our pip calculator will help you determine the value per pip in your base currency so that you can monitor your risk per trade with more accuracy.
All you need is your base currency, the currency pair you are trading on, the exchange rate and your position size in order to calculate the value of a pip.
How it works:
When you get to your pip value calculator,
- choose the currency pair you are going to trade
- Set your trade size in units, eg. 1000 units, 10,000 units or 100,000 units
- Choose your account currency;it can be in USD, EUR, CAD, or any other.
- Use the current rate.
- Click on calculate; the pip value will be displayed below.
By using a formula;
Pip Value = (pip value in decimal places × trade size in units)/exchange rate.
One Pip: 0.0001
Account Currency: EUR
Currency Pair: EUR/USD
Exchange Rate: 1.08962 (EUR/USD)
Lot Size: 1 Lot (100,000 EUR)
Pip Value = (0.0001 x 100,000)/ 1.08962
Each Pip is worth €9.18
What is a pip?
Pips represent the smallest movement that a currency pair can make.
A pip is a short term for percentage in point or price interest point, used to measure the change in the value between two different currencies. When price changes on the exchange, the change in price is referred to as a Pip/s or Pipette change.
A pipette is a fractional pip and is equivalent to 1/10 of a pip. Currency pairs with a pipette are displayed to 5 decimal places (0.00001) unlike the Yen pairs which are put to 3 decimal places (0.001).
For currency pairs displayed to 4 decimal places, one pip = 0.0001
Yen-based currency pairs are an exception, and are displayed to only two decimal places (0.01)
For Yen pairs quoted in 3 decimal points a pip increment is based on the second decimal. For example AUD/JPY at 83.8(4)7. The last digit represents a pipette (7)
For pairs quoted in 5 decimal points a pip increment is based on the fourth decimal, like the EUR/USD, 1.230(4)4.
EUR/USD: A movement from 1.230(4)4 to 1.230(5)4 is a 1 pip movement.
In AUD/JPY, a movement from 89.6(2)5 to 89.6(3)5 is 1 pip movement.
To determine how much is a pip worth? You need;
The currency of your account
- The pair you are trading
- The position size of your trade in units.
The Value of Pips
The value of the pips for your trade can vary depending on your lot size when you’re trading, and the difference in pips between the bid and ask is called the spread. The spread is a payment to brokers. This is how brokers make money from forex when you open a position because most forex brokers do not collect an official commission.
When your trade is positive in pips, you are making a profit
When it’s in negative, you’re making a loss.
What is a forex lot?
A lot refers to the bundle of units/ size of a trade you can place when trading in the forex market. It is represented in a bundle of 1000 by forex brokers.
Before taking any position, it is important to note that lot size directly affects the risk you are taking.
Lot size directly impacts how much a market move affects your accounts so a 10pip movement on a small trade will not have the same impact as much as the same 10 pip movement on a very large trade size.
Therefore, finding the best lot size with a tool like a pip calculator can help you determine the desired lot size based on the size of your current accounts and the amount you would like to risk.
Let’s have a look at the different lot sizes provided by forex broker.
Micro lots are the smallest tradable lot offered by most brokers. A micro lot is a lot of 1000 units of your accounting funding currency. If your account is funded in US dollars a micro lot is $1000 worth of the base currency you want to trade. If you are trading a dollar-based pair, 1 pip would be equal to $0.1. Micro lots are very good for beginners that need to be more at ease while trading.
A mini lot is worth 10,000 units of your account funding currency. If your account is in dollars, a mini lot is worth $10,000. This simply means trading a dollar-based pair e.g. USD/CAD, each pip in a trade is worth about $1.
A standard lot is a 100,000 unit lot. That is a $100,000 for a dollar account. The average pip size for standard lots is worth $10 per pip. This means if a market moves 1pip, against you, you loss $10, for 10 pips you loss $100. The opposite happens when the market is moving in your favor. You will make $100 dollars when the market moves 10 pips to your direction. To trade this you need to have a bigger account to adjust for the pip value otherwise your account can be blown by just a small movement in the market.
Therefore it is always important to choose a lot size that matches your account size, that way you will be able to last long in the trading game.
Let’s have a quick summary on forex lot sizes and the respective pip value
|Lot Size||Units||Pip value in decimal||Pip value in dollars|
|Other pairs||Yen pairs||Other pairs||Yen pairs|
Why do you need to know the pip value for your trade?
Pip value can be used to determine gains, or losses when trading.
A pip measures the amount of change in the exchange rate for a currency pair, and is calculated using last decimal point. Since most major currency pairs are priced to 4 decimal places, the smallest change is that of the last decimal point.
When in trade and it moves 100pips in your favor, you will be able to determine your profits by multiplying with the value per pip.
For example, if you are trading mini lots (10,000 units) for 100pips, it will be worth (100pips x $1) = $100. For a standard account it would be (100pips x $10) = $1000 and a micro would be (100pips x $0.1) = $10.
In case a trade goes against you, you will also be able to calculate your losses using the pip value times the number of pips the trade moves against you.
Using a pip value you will be able to determine your stop loss in money terms. This will help you to choose the appropriate risk to reward ratio for your trades.
How to calculate pip value?
Here are some examples on how to calculate pip value in monetary terms for your trades whether your account denomination is in USD dollars or not. Read more
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