What is a pip?
In Forex Affiliate Program you should know the terminology. It is very helpful in Forex trading and pip is very much use in forex trading. A “pip” stands for “Percentage in Point”. A pip is the negligible price movement of a traded currency. It is also referred to as a Point. When a currency moves from a value of 1.4510 to 1.4515, it moved 5 pips. When a pip has a value of $10, you have gained $50. For most currencies a pip is 0.0001 or 1/100 of a cent. You may imagine it is an extremely small value. However, take into account that most currencies are traded in lots of $100 000. For that amount a pip is $10.
PIP is an acronym for Price Interest Point. It is the smallest unit of a currency. It is the farthest digit to the right of a currency pair. Suppose the EUR/USD moves from 1.1400 to 1.1401, then it moved 1 pip which is equal to 0.0001. With currency pairs related to the Japanese Yen, a pip is equal to 0.01 because there are only 2 digits after the decimal.
A pip is the minimum movement of a currency upwards or downwards. To calculate each pip for every currency, divide 1/ (currency pair exchange rate) Ex: 1/224.92 (GBP/JPY) = 0.00444 GBP. If you’re trading a 100:1 leverage account, then multiply this with 100. Ex 0.00444 x 1000 = 4.44 GBP. To transform this to USD just convert it. Ex: GBP/USD = 1.9377 x 4.444 = 8.6 USD / pip. Another example is to calculate a pip for GBP/USD. 1/1.9377 = 0.516 GBP. For a 100:1 standard account, multiply that with 10. Ex: 0.516 x 10 = 5.16. To convert in USD multiply with 1.9377. Ex: 5.16 x 1.9377 = 9.98 USD / pip. Without proper risk management, this high degree of leverage can lead to large losses as well as gains.
The pip designation refers to the smallest amount that an exchange rate can increase. It has the same meaning to the “tick” term used on the futures markets. It can vary its size but a pip value is usually 0.0001 (like in the EUR/USD cross). As an example, a move from 1.2100 to 1.2110 in the EUR/USD cross would have been a 10 pips movement. 11. How much is a pip worth? First we need to know how much value does a pip have in percentage. A pip’s value in percentage is calculated by multiplying the cross rate’s value per 100, and then dividing the leverage value by that number. So, a pip value on the EUR/USD cross that has a value of 1.2100 with a 10/1 leverage is calculated like this: 10/(1.21*100) which would give us a result of around 0.0826%, so a pip value with a 1,000 capital, would be 1,000*0.0826, that means US$82.64 at 10/1, or US$8.26 at 1/1 leverage. So at a 1.21 EUR/USD rate and with a US$1,000 investment, a 10 pips move would be worth around US$82 at 1/1 and US$826 at 10/1. T
