Forex trading education - how do Pips Calculated?
We take the amount of the transaction that we have performed in terms of the base currency and divide by 10,000 - this is the value of one pip in terms of the counter currency.
For example: For a transaction of 100,000 Euros we divide by 10,000 and we get 10. This means that the value of every pip is $10.
If we execute a transaction of 30,000 Euros, every pip worth 3 USD.
For the Japanese Yen the calculation is slightly different. We divide the amount of the transaction in terms of the base currency by 100 and that is the value of the pip.
For example A transaction of 100,000 USD in the currency pair USD/JPY, we divide by 100 and the result is 1,000 Yen. Assuming that the exchange rate is 88.00, we divide the 1,000 by 88, meaning, 11.36 USD per pip.
Example: We will take the currency pair EUR/GBP and a transaction of 100,000 Euros, each pip is worth 100,000 divided by 10,000 and is therefore worth 10 USD. And in what currency are we paying in? In Pounds. Meaning that every pip is equal to 10 Pounds.
Whats Next?
* Size of spreads
Or go back to the education index
For example: For a transaction of 100,000 Euros we divide by 10,000 and we get 10. This means that the value of every pip is $10.
If we execute a transaction of 30,000 Euros, every pip worth 3 USD.
For the Japanese Yen the calculation is slightly different. We divide the amount of the transaction in terms of the base currency by 100 and that is the value of the pip.
For example A transaction of 100,000 USD in the currency pair USD/JPY, we divide by 100 and the result is 1,000 Yen. Assuming that the exchange rate is 88.00, we divide the 1,000 by 88, meaning, 11.36 USD per pip.
Example: We will take the currency pair EUR/GBP and a transaction of 100,000 Euros, each pip is worth 100,000 divided by 10,000 and is therefore worth 10 USD. And in what currency are we paying in? In Pounds. Meaning that every pip is equal to 10 Pounds.
Whats Next?
* Size of spreads
Or go back to the education index
