Pip is one of the well-known words that you often hear while discussing forex trading. It is one of the primary terms used as jargon and a particular term. Every forex trader is curious to know what pip is and how to calculate it in forex trading. Let’s begin with what is?
What is Pip?
PIP is known as an acronym that stands for point in percentage. It is used to represent the smallest unit of movement for currency exchange in a currency pair. The pip value is expressed in the base currency value. In other words, it is also known as the smallest value in forex trading, and it is 0.0001 USD.
How to Calculate Pip: Step–to–Step Procedure
We are using an example in order to brief about how to calculate pip. This guide will also help the forex brokers in South Africa. Let’s begin the steps:
First of all, you need to find the size of a pip. For all currency pairs, it is 0.0001. But it has some objections if we talk about the Japanese Yen. It is 0.01 for the Japanese Yen. Yen has this pip value due to the low value of the currency – Yen.
After finding the size of a pip, now find the rate of exchange or exchange rate. We will use these values in further calculations. Without these two steps, we cannot find the pip value.
The following stated below is used to determine the pip value.
Pip value = (pip size / exchange rate) × position size
Now, you can easily convert the determined pip value to your currency by using the currency exchange rate.
After following these steps, you can easily find the value of a pip. The more pips you have, the more you have chances to get more profit in forex trading. It is the first step toward forex investment.
Why calculate PIP in forex?
Forex trading is a popular type of trading in the world. It is known as the modern form of trading, and it has made a huge impact on the financial markets. This trading technique is used to invest money from one person to another in exchange for foreign currencies.
It is also known as a financial instrument. Most people who have investments in Forex exchange are trying to find an idea for which country to invest in. Generally, people prefer to invest in foreign currency exchange to earn a good number of profits at regular intervals.
Pip is used in all types of currency pair exchange, such as USD, Euro, Yen, Pound, and others. It is one of the basic terms in the market and is highly useful for all forex trading. Every forex trader will use the pip value while doing an activity in forex trading. You have to be precise about the pips and the maximum possible sum that can be achieved. So, follow the steps mentioned above to get a better forex trading result.