Lesson 10. Calculating value of a pip

In order to calculate the value of one pip in a currency pair, you have to multiply the amount of your trade in lots by one pip in a decimal form (0…

In order to calculate the value of one pip in a currency pair, you have to multiply the amount of your trade in lots by one pip in a decimal form (0.0001 or 0.01), and then divide it by the current exchange rate of the quote currency to the US Dollar.

Lot is given in units of our base currency.

You should remember that the US Dollar is a quote currency in many pairs (EUR/USD, GBP/USD etc.). It means that the exchange rate of the quote currency to USD equals to 1.

For such pairs one pip will always cost $10 when we trade a 100 000-unit contract or 1 standard lot.

For the pairs where the US Dollar is a base currency (USD/CHF, USD/CAD), pip value depends on the exchange rate.

For the pairs that include the Japanese yen the pip value is calculated as follows.