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Measuring Forex Trading Value Change

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Traders often use pips to reference gains, or losses. A pip measures the amount of change in the exchange rate for a currency pair, and is calculated using last decimal point.


Since most major currency pairs are priced to 4 decimal places, the smallest change is that of the last decimal point which is equivalent to 1/100 of 1%, or one basis point.


For a trader to say “I made 40 pips on the trade” for instance, means that the trader profited by 40 pips.


The actual cash amount this represents depends on the pip value.


For currency pairs displayed to 4 decimal places, one pip = 0.0001
Yen-based currency pairs are an exception, and are displayed to only two decimal places (0.01)