FOREX PIP VALUE

So now we know what lots are and the advantages / disadvantages of Leverage. And now is the right time to answer this important question – what is the value of 1 Pip in the currency pair I am trading?

For currency pairs where USD is the base currency like USD/CAD and USD/JPY the following is the value of 1 pip assuming that your broker account is open in US Dollars.

• Trade of 1 Lot (1), 1 pips value is $10
• Trade of 1 Mini Lot (0.1), 1 pip value is $1
• Trade of 1 Micro Lot (0.01), 1 pip value is $0.1
• Trade of 1 Nano Lot (0.001), 1 pip value is $0.01

So now you know the value of 1 pip. So if you are trading with 1 Lot, and you are in profit by 5 pips, actually your overall profit is $50. 1 pip is $10, so 5 x $10 is $50.

If you are trading with 2 Lots instead of 1, your profit is $50 x 2 (lots) = $100.

Ok, but what if I am trading EUR/USD, where the base currency is not US Dollar? In this case we need to convert the value of $1 into Euro using the current actual price of the pair. So let’s assume that the current price of EUR/USD is 1.3070.

So if €1 is equal to $1.3070, then $1 equals how much? This is simple maths. So (1 x 1) / 1.3070 equals € 0.7651. So 1 pip actual value is € 0.7651 in the EUR/USD pair.

Again if you are trading with 1 Lot for EUR/USD, then 1 pip move is equivalent to € 7.65.

Practical Approach
To be honest I don’t go into all this mathematics prior entering as trade, since by the time I finish calculating, the price would have already moved considerably. So I just always calculate with US Dollars in mind.

For sure it is a straight forward mathematics ($1, $10 etc.), and at the end of it the pip value of the other currencies will be less than the pip value of the US Dollars, that is less than $10, $1 etc. So I will be risking less, although I will be earning less. But protecting your capital is of extreme importance in Forex. So stick with this in mind and you will do fine.