What Is Pip In The Forex Market?
What Is Pip?
If you have witnessed conversations in Forex or foreign currency communities; you have heard or seen the sentences like “EUR / USD 100 Pip advanced”, “15 Pip returned”. Pip means point. Pip is an exchange jargon that is often used instead of punctuation. For the Forex and foreign exchange market, the Pip means the percentage point with the smallest incremental price change standardized for any foreign exchange.
Why Is Pip In Forex Market Important?
Pip is very important in Forex , 1 Pip corresponds to a different dollar amount for each currency, and anyone interested in this market should know how to calculate the Pip value. It is impossible for a forex trader who does not know how to calculate the value of the pip to know how the transaction in any foreign currency will affect the value in his account.
How Are Pip Values Calculated?
Now that we know what the Pip expression means, let’s learn how to calculate the Pip values with one example.
First Example USD / JPY
For a currency pair that receives US dollars as the base currency, we divide only the smallest price change into the existing quotation, and multiply the amount after the section by the amount of currency in which the transaction is made. At the end of this process we have calculated the Pip value.
In the above example, we obtained the Pip amount of 0.01, which is the USD / JPY exchange rate of 89.00, and the result of 0.00011235, that is, pips per dollar.
Pip value calculations can be done like the above examples, may have been mixed up at first sight. As a matter of fact, the only information you need to know from this post is what the Pip word means.