A short reminder:

Forex Quote consists of 2 currencies.

Base currency (EUR/xxx) which determines the Value of your trade, how much you buy or sell.

Quote or Term currency (xxx/USD) that determines the currency of the Pip.

Value of the pip is determined by the Value of the trade and the quote currency, currency of the pip.

Pip value for your trade tells you how much you make or lose on your trade when the pair moves by 1 pip up or down.

You must promise not to trade Forex before you can understand the pip value of the trade in the blink of an eye!!!

We are here to help with this simple task

Let’s check the pip value for a few trades:

300 000 EUR/USD

  1. Base Currency: EUR
  2. Quote(Term) Currency: USD
  3. Trade Value: 300 000 Units of EUR(always base Currency)
  4. PipValue Currency: USD( always Quote Currency)
  5. Pip as a decimal: 0.0001
  6. PipValue = Units*Pip as a decimal (in PipValue Currency)

So the final calculation is:

Pip Value for the 300 000 EUR/USD trade = 300 000*0.0001USD= 30USD!

So if EUR/USD moves by 40 pips in your favor you will be good, green 1200 USD in profit!

Please find the PipValue Cheat Sheet for the most traded Forex pairs:

 

Download


Let us play with Pip-san now!

The pip of the Forex pairs where pip is denominated in Japanese Yen. Quote example for the xxx/JPY pair look similar to the below:

USD/JPY @ 120.40

Meaning that one American dollar is worth 120yen and 40 sen.

Sen is the subunit for the Japanese Yen worth 1/100 of one Yen. Sen is the Japanese counterpart of American cent.

Pip san is always the second decimal after the dot:

Pip san= 0.01,

Let’s see the calculations now

60 000 USD/JPY

  1. Base Currency: USD
  2. Quote(Term) Currency: JPY
  3. Trade Value: 60 000 Units of USD(always base Currency)
  4. PipValue Currency: JPY( always Quote Currency)
  5. Pip as a decimal: 0.01
  6. PipValue = Units*Pip as a decimal (in PipValue Currency)

And again calculation is:

Pip Value for the 60 000 USD/JPY trade = 60 000*0.01JPY= 600JPY!

So if your USD/JPY trade goes against you by 30 red pips you will be losing 18 000 JPY (600*30)!

18 000 JPY with the USD/JPY rate of 120.40 is equivalent of nearly 150 USD.

18 000 /120.40 =149.50 USD

#tradesafely