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Glossary

Pip (Percentage in Point)

A point in percentage or pip is a standardized unit of measure in an exchange rate. In forex, the value of the exchange of a currency is represented in pips.  Major currencies are priced to four decimal points, excluding the Japanese yen, which is priced to two decimal points only.
  • Most currency pairs, one pip = 0.0001
  • Currency paired with Japanese Yen, one pip = 0.01
  Most currency pairs, such as the USD/EUR, trade-in 4 decimal places ( 1 pip = 0.0001) and trade in terminals in 5 decimal places ( 1 technical pip = 0.00001). Spreads, order distances, and other parameters are normally quoted in 4 decimals in company websites; however, in trading platforms, they are quoted in 5 decimals. Most currency pairs trade in 4 decimal places except currencies paired with the Japanese Yen, where the pip is 0.01, and the technical pip is 0.001.   For example, the currency pair GBP/USD. Assume that its buy price is 1.68551.  If it changes from 1.68551 to 1.68552, that means it increased by 1 technical pip. If the price changes from 1.68551 to 1.68550, that means it decreased by 1 technical pip. In the currency pair USD/JPY, an increase of 1 usual pip means that from 125.87, it rose to 125.88.  To manage your risks, you must learn the pip value of each position.   Calculating Pip Value The value of a pip depends on these three factors: (1) quoted currency, (2) volume of the trade, and (3) exchange rate. These factors significantly affect trade as even a change of 1 pip can profoundly impact the value of the open position.   To calculate the value of one pip, the following formula is used: The value of 1 pip = (Pip in decimal places * Trade Volume)  
Trading position volume Calculation 1 PIP_VALUE
100,000 EUR 100,000 * 0.0001 10 USD
10,000 EUR 10,000 * 0.0001 1 USD
1,000 EUR 1,000 * 0.0001 0.1 USD
100 EUR 100 * 0.0001 0.01 USD
Example A: 1 pip volume in EUR/USD is equal to 0.0001    Example B: 1 pip volume in USD/JPY is equal to 0.01
Trading position volume Calculation 1 PIP_VALUE
100,000 USD 100,000 * 0.01 1000 JPY
10,000 USD 10,000 * 0.01 100 JPY
1,000 USD 1,000 * 0.01 10 JPY
100 USD 100 * 0.01 1 JPY
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