How to calculate the value of 1 point (pip) for one lot of a currency pair?
Let’s use the pair EURCHF as an example. If the current ask price is 1.600 it means that to buy one lot worth of EUR (EUR 100,000) you need CHF 160,000. With the price moving one point to 1.6001 the value of the base currency remains the same – EUR 100,000, but to buy this amount you would need 160,010 of the quote currency, CHF. This means that the value of one pip is 160,010 – 160,000 = 10 CHF. For pairs with 3 digits after the dot the value of the pip is calculated in 3 digit numbers (i.e. 100s); for pairs that have 2 digits after the dot the pip value is calculated in 4 digit numbers (i.e. 1000s). For example, in all pairs with USD as a quote currency (EURUSD, GBPUSD…) the value of the pip is $10. In pairs where JPY is a quote currency (USDJPY, EURJPY) one pip is equal 1000 Yen, which is approximately $8-12 depending on the JPY rate.
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