What's Pips
Once you have decided to open an account on the FOREX, you'll be given the option laverage how you will take, and how many pips profit target you plan and how many lots would you traded?
What the hell was pips, laverage and lots?
The most common increment of currencies is the Pip. If the EUR / USD moves from 1.2250 to 1.2251, that is ONE PIP. A pip is the last decimal place of a quotation, given that four decimal places are used (as some displays quotations of five or more decimal places, indicating a fraction of a pip). The Pip is how you measure your profit or loss.
As each currency has its own value, it is necessary to calculate the value of a pip for that particular currency. In currencies where the U.S. Dollar is quoted first, the calculation would be as follows.
Let's take USD / JPY rate at 119.80 (notice this currency pair only goes to two decimal places, most of the other currencies have four decimal places)
In the case of USD / JPY, 1 pip would be .01
Therefore,
USD / JPY:
119.80
.01 Divided by exchange rate = pip value
.01 / 119.80 = 0.0000834
This looks like a very long number but later we will discuss lot size.
USD / CHF:
1.5250
.0001 Divided by exchange rate = pip value
.0001 / 1.5250 = 0.0000655
USD / CAD:
1.4890
.0001 Divided by exchange rate = pip value
.0001 / 1.4890 = 0.00006715
In the case where the U.S. Dollar is not quoted first and we want to get the U.S. Dollar value, we have to add one more step.
EUR / USD:
1.2200
.0001 Divided by exchange rate = pip value
so
.0001 / 1.2200 = EUR 0.00008196
but we need to get back to U.S. dollars so we add another calculation which is
EUR x Exchange rate
So
0.00008196 x 1.2200 = 0.00009999
When rounded up it would be 0.0001
GBP / USD:
1.7975
.0001 Divided by exchange rate = pip value
So
.0001 / 1.7975 = GBP 0.0000556
But we need to get back to U.S. dollars so we add another calculation which is
GBP x Exchange rate
So
0.0000556 x 1.7975 = 0.0000998
When rounded up it would be 0.0001
The bottom line is the calculations pips profit from the smallest unit of FOREX transactions
Read !
Hello everyone i want to thank MR Richard for helping me recovered my lost funds,
ReplyDeleteI was scammed by a fake broker who keeping demanding money from me, when the time due for me to make a withdrawal of my profits they suddenly change the name of their company that and is how i lost everything i have been investing from day one . i cried my eye out but to no avail. A friend of mine directed me to one MR Richard for help i gave him all the necessary info to my greatest surprise my lost funds was well recovered no dime was left out. I'm so happy and now i know that their are still good people out there one could trust . I will like to recommend any one to him for help and i assure you that your lost funds will be recovered.
His email .. richardraymond104@gmail.com