Understanding Forex Pips
A Pip is the term for Percentage In Point or Price Interest Point. It is the smallest measurement for the smallest value (price) change of a currency. This term is one of the most important one among many in Forex currency trading, and should be properly understood by any new Forex trader.
Since transactions in Forex involve very large sums of currency and Forex spreads are usually very small, currency pairs are quoted to the fourth decimal place to be accurate. This is what is known as a Pip, or the smallest change of a currency pair. Take for example the currency pair of USD/EUR, quoted at 1.2345 and changes to 1.2346, the change in Pip would be 1. And if it changes from 1.2345 to 1.2305, the corresponding Pip change would be 40 Pips. Presently, there are 6 widely-traded currency pairs or called the majors, which are the following:
* EUR/USD, also called the 'EURO" * GBP/USD, also called the "CABLE" * USD/CHF, also called the "SWISSIE" * USD/JPY, also called the "NINJA" * USD/CAD, also called the "LOONIE", or "BEAVER" * AUD/USD, also called the "AUSSIE" *
The EUR/USD is the most traded major by an average of 100 Pips a day.
Profits and losses in Forex use the Pip as an accurate means of measurement, but the Pip for a USD/JPY pair has a different value compared to the Pip for USD/CAD, as it is set to the 2nd decimal place since it's value is smaller comparable to a cent/hundredth of other major currencies.
If you trade the currency pair of USD/JPY at 110.95 and moves to 111.0, it gained 5 Pips. With a quote of 77.48 that changed to 77.53 would mean a 5 Pip increase. If it were the USD/CAD pair while at 1.0234, then changes to 1.0224, 10 Pips would have been lost. Trading with the AUD/USD with an exchange quote of 1.9876, the Pip equivalent is .0001, as it set by market makers at 4 decimal places.
So, in Forex trading "30 Pips" would mean thirty units of value in trading. Since individual currencies have different quotes in terms of Pips, it's important to take note of such differences so as not to get confused in your trading. Dealing with large sums might seem daunting at times, but will get easier gradually as you begin to get acquainted with Forex trading as time passes.
In order not to get confused with the quotes, most currency paired with the USD are placed at 4 decimal places or .0001, while the yen is place at 2 decimal places or .01. Keeping this information on Forex Pips at all times during your trading can greatly help. - 23199
Since transactions in Forex involve very large sums of currency and Forex spreads are usually very small, currency pairs are quoted to the fourth decimal place to be accurate. This is what is known as a Pip, or the smallest change of a currency pair. Take for example the currency pair of USD/EUR, quoted at 1.2345 and changes to 1.2346, the change in Pip would be 1. And if it changes from 1.2345 to 1.2305, the corresponding Pip change would be 40 Pips. Presently, there are 6 widely-traded currency pairs or called the majors, which are the following:
* EUR/USD, also called the 'EURO" * GBP/USD, also called the "CABLE" * USD/CHF, also called the "SWISSIE" * USD/JPY, also called the "NINJA" * USD/CAD, also called the "LOONIE", or "BEAVER" * AUD/USD, also called the "AUSSIE" *
The EUR/USD is the most traded major by an average of 100 Pips a day.
Profits and losses in Forex use the Pip as an accurate means of measurement, but the Pip for a USD/JPY pair has a different value compared to the Pip for USD/CAD, as it is set to the 2nd decimal place since it's value is smaller comparable to a cent/hundredth of other major currencies.
If you trade the currency pair of USD/JPY at 110.95 and moves to 111.0, it gained 5 Pips. With a quote of 77.48 that changed to 77.53 would mean a 5 Pip increase. If it were the USD/CAD pair while at 1.0234, then changes to 1.0224, 10 Pips would have been lost. Trading with the AUD/USD with an exchange quote of 1.9876, the Pip equivalent is .0001, as it set by market makers at 4 decimal places.
So, in Forex trading "30 Pips" would mean thirty units of value in trading. Since individual currencies have different quotes in terms of Pips, it's important to take note of such differences so as not to get confused in your trading. Dealing with large sums might seem daunting at times, but will get easier gradually as you begin to get acquainted with Forex trading as time passes.
In order not to get confused with the quotes, most currency paired with the USD are placed at 4 decimal places or .0001, while the yen is place at 2 decimal places or .01. Keeping this information on Forex Pips at all times during your trading can greatly help. - 23199
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posted by X - Men @ 12:19 PM
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