Calculating 1 pip value for different currency pairs
So, if you as in last example open a long trade with one standard lot on EUR/USD, you will be buying 100,000 units. In this case your profit will be not 0.00009478 USD for 1 pip the price goes in your favor, but 0.00009478 USD *(multiplied) 100,000 which is approximately 9.4787 USD. You may also open trade with mini (10,000), or even micro (1,000) lots. In this case, your profits will be something like 0.94786 USD and 0.09478 USD per 1 pip accordingly.
You should remember that the US Dollar is a quote currency in many pairs (EUR/USD, GBP/USD etc.). It means that the exchange rate of the quote currency to USD equals to 1. For such pairs one pip will always cost $10 when we trade a 100 000-unit contract (1 standard lot):
100 000 * 0.0001 / 1 = $10 (pip value for EUR/USD)
For the pairs where the US Dollar is a base currency (USD/CHF, USD/CAD), pip value depends on the exchange rate:
100 000 * 0.0001 / 1.0195 = $9.8 (pip value for USD/CHF)
For the pairs that include the Japanese yen the pip value is calculated as follows:
100 000 * 0.01 / 120.65 = $8,28 (pip value for USD/JPY)
Other articles in this section
- Demo accounts
- Forex brokers
- MACD (Moving Average Convergence/Divergence)
- Position size, level of risk
- Margin, Leverage, Margin Call, Stop Out
- Swap and rollover
- Transaction, profit, loss. Types of orders
- Economic calendar
- How can I predict where exchange rates will go?
- When is Forex market open?
- Bid and Ask price. Spread
- What is a lot?
- What are pips and lots?
- How to trade?
- The advantages of Forex market
- What is Forex?