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The Importance of Pips in Forex Trading - The Forex Pips- Forex Trading Signals Provider- 14 Days VIP Free Trial

LearningThe Importance of Pips in Forex Trading

The Importance of Pips in Forex Trading

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Pip Values for U.S. Dollar Accounts

The currency you used to open your forex trading account will determine the pip value of many currency pairs. If you opened a U.S. dollar-denominated account, then for currency pairs in which the U.S. dollar is the second, or quote, currency, the pip value will be $10 for a standard lot, $1 for a mini lot, and $0.10 for a micro lot. Those pip values would change only if the value of the U.S. dollar rose or fell significantly—by more than 10%.

If your account is funded with U.S. dollars and the dollar isn’t the quote currency, you would divide the usual pip value by the exchange rate between the dollar and the quote currency. For example, if the U.S. dollar/Canadian dollar (USD/CAD) exchange rate is 1.33119, the pip value for a standard lot is $7.51 ($10 / 1.3319).


Pip Values for Other Account Currencies

If your account is funded with a currency other than the U.S. dollar, the same pip value amounts apply when that currency is the quote currency. For example, for a euro-denominated account, the pip value will be 10 euros for a standard lot, 1 euro for a mini lot, and 0.10 euro for a micro lot when the euro is the second currency in the pair. For pairs in which the euro isn’t the quote currency, you would divide the usual pip value by the exchange rate between the euro and the quote currency.


Pip Movements in Trades

Let’s say you’re trading the euro/British pound (EUR/GBP), and the bid price is 0.8881 and the ask price is 0.8884. You expect the euro to rise against the pound, and so you buy a standard lot of euros at the ask price of 0.8884. Later in the trading day, the bid price is 0.8892 and the ask price is 0.8894. You sell at the bid price of 0.8892. You gained 8 pips. If your account is funded with pounds, you made 80 pounds on the trade.