How to use the Pip Calculator?
Always be sure to know what each pip is worth. To use the pip calculator, type in the amount of lots you wish to trade, then choose the currency pair and the currency your trading is conducted in. Once you click calculate, you will see what each pip is worth and if its in accordance to your risk management rules.
In case you were wondering what PIP actually stands for, it is ‘Point in Percentage’.
In the FX Industry, a pip is a simple word for a point and is used to calculate profits and losses.
In most accounts each pip is one unit of the currency your account is traded in. So if your account is traded in USD, each pip will be worth $1.
On most trading platforms the pips of a particular asset are displayed in a larger font, making it clear for the trader to see what the exact price is and how many pips it has moved.
Most brokers will calculate each currency pair to 1/10th of a pip. On JPY pairs you will see quotes listed to 1/1000th, and for all other pairs you will see the quote as 1/100,000th of a place. This allows dealers and brokers to bring down the price of spreads, offering the retail customer the tightest bid ask possible.
The following is a quick example of how you would calculate the value of a PIP.
For simplicity we will use EUR/USD, which trades in standard lots, which in pip value is 10,000.
To calculate, you will simply multiply 10,000 by .0001 because as mentioned earlier, 1/10,000th is a PIP for all currency pairs apart from JPY crosses.
This calculation will give you the result of 1 because EUR/USD is traded in dollars, this will mean that each pip will be worth the equivalent of 1 US Dollar for each 10,000 lot of EUR/USD traded.