If you entered EUR/USD long at 1.0500 and prices moved higher to 1.0550, it means that you made 50 pips. Congratulations! You’ve earned some money. OK, you might say, but how much? Good question! Let us calculate your profits.
There is a simple formula for this: 1 pip in the decimal form / the current exchange rate of the quote currency to the US Dollar = value per pip. In our case: 0.0001/ 1.0550 = 0.00009478 USD (rounded up). It means that you will get this sum for every pip of your profitable trade. As you can see is not a large sum of money. Well, it’s because it is the value of a pip per unit, but traders operate with a bigger number of units – so-called lots.
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?
- Currency pairs. Base and quote currencies. Majors and crosses
- What technical tools do I need for trading?
- The advantages of Forex market
- What is Forex?