Calculate PIPS

What Is A Pip?

Pip stands for price interest point or percentage in point and is the slightest price change in the currency exchange rate. For most currency pairs, it corresponds to 1/100 of a percentage point and is the fourth decimal place (0.0001) in an exchange rate. However, pip values are counted at the second decimal place (0.01) for the Japanese Yen (JPY). The number of pips you make on a transaction will decide how much money you make on a trade because the cost of a pip for your trade fluctuates depending on your lot size.

The Fixed Pip Quantities Based On The Lot Size Are As Follows:

How To Calculate Pips?

You can either calculate pips Manually or Automatically using a Pip Calculator

Manual Method

Formula: Pips = (Price Difference * Base Currency Unit ) / Current Exchange Rate

For instance, if you are trading 1,000 units of the base currency and the price difference between two currencies is 0.0004, you would calculate the number of pips as –
Pips = (0.0004 x 1,000) / the current exchange rate.

The USD is the most exchanged currency in the forex market. The value of pip remains constant if USD is selected as the second currency in your account. An ordinary lot would cost $10, a mini lot would cost $1, a micro lot would cost $0.10, and a nano lot would cost $0.01. In order to calculate the pip value for an account in U.S. dollars, such as EUR/USD or GBP/USD, multiply the above-mentioned standard pip values per lot by the relevant exchange rate.

Automatic Method Using Pip Calculators

Using a pip calculator makes calculating gains and losses easier. A forex trader needs to comprehend pip and be able to calculate it accurately because it denotes both an increase and a decrease in the value of a currency pair. The calculator will determine the pip value for standard, mini, and micro lots using the most recent market rates once you have chosen your account currency and trade size. In comparison to manual calculations, using forex pip calculator is more beneficial as all calculations are hassle-free, accurate, get completed instantly, and there are fewer chances to make mistakes.

Conclusion

Pips play a crucial role in every trader’s experience with forex as they assist traders with risk management in addition to measuring price fluctuation. Both manual and automatic calculation is explained in the article. Manual calculations are time taking and you might make huge mistakes. Whereas, the automatic method is hassle-free, has more accuracy level, and less time taking. It totally depends on you which method you prefer.