How is pip calculated for different currencies?

<p id="isPasted">Pip value is a confusing topic in foreign exchange (forex) trading. In most currency pairs, a pip is the fourth decimal place and represents the movement of currency. As an example, if the EUR/USD moves from 1.1015 to 1.1016, that is a one pip move.</p><p><strong>Pip Value Calculation When Trading in a USD Account</strong></p><p>For a standard lot of U.S. dollar/Canadian dollar (USD/CAD) when trading in a USD account, divide USD$10 by the USD/CAD rate. If the USD/CAD price is 1.34105, the standard lot pip value will be USD$7.46 or USD$10 divided by 1.34105.</p><p><strong>Pip Value Calculation for a Non-USD Account</strong></p><p>When the CAD/JPY is priced at 79.941, divide CAD$10 by 79.941, then multiply by 100, for an equivalent pip value of CAD$12.51.</p><p>You can use the same procedure to find pip values for pairs that include any account currency.</p><p><strong>Pip Value for Other Currency Pairs</strong></p><p>A standard lot for this pair would be CAD$10 for a person with a CAD account, so if your account currency is the euro, you want to know the pip value of AUD/CAD. Divide the CAD$10 by the EUR/CAD rate to convert it to euros. When the rate is 1.48132, the standard lot pip value is EUR6.75.</p><p>Consider always which currency provides the pip value: the second currency (YYY). Once you have that information, divide the fixed pip value in that currency by XXX/YYY, where XXX is your own account currency.</p>

<p id="isPasted">Let's look at the EUR/USD currency pair as an example of pips in currency pairs. The value of one pip is 8.93 euros ((0.0001/1.1200) * 100,000). The value of the pip is converted to U.S. dollars by multiplying it by the exchange rate, so the value in U.S. dollars is $10 (8.93 * 1.12).</p><p>Due to the differences in exchange rates between various currencies, one pip has a different value between currency pairs. There is a phenomenon when the U.S. dollar is quoted as the quote currency. If this is the case, the value of the pip is always equal to US$10 for a notional amount of 100,000 currency units.</p>

<p id="isPasted">PIP (or "percentage in point") is a unit of measurement used to express the change in the value of a currency pair. The value of a pip depends on several factors, including the currency pair being traded, the size of the position, and the exchange rate.</p><p>In general, the calculation of a pip value for a currency pair involves multiplying the size of the trade (in lots) by the size of the pip (in decimal points) and then by the current exchange rate.</p><p>Here is an example of how to calculate the pip value for the EUR/USD currency pair:</p><p>Assume that you have a 1 lot position (which is equal to 100,000 units) in EUR/USD, and the current exchange rate is 1.1800.</p><p>The pip value for EUR/USD can be calculated as follows:</p><ol><li>The size of a pip for EUR/USD is 0.0001 (or 1/10,000th of a unit of currency).</li><li>To calculate the value of a pip in USD, you multiply the size of a pip by the exchange rate. In this case, the value of a pip in USD would be 0.0001 x 1.1800 = $0.000118.</li><li>To calculate the value of a pip in EUR (if your account currency is denominated in EUR), you would need to divide the pip value in USD by the current exchange rate. In this case, the value of a pip in EUR would be $0.000118 / 1.1800 = €0.0001.</li></ol><p><br></p><p>The calculation of pip values for other currency pairs would follow a similar process, but the size of a pip and the exchange rate used in the calculation would be different for each currency pair.</p>

<p id="isPasted">While the concept of pips remains the same across currencies, the actual calculation for pip value differs based on the currency pair and its quoted price format. Here's a breakdown:</p><p><strong>General Pip Definition:</strong></p><ul><li><p>A pip (percentage in point) represents the smallest unit of price movement in a currency pair.</p></li><li><p>In most major pairs,&nbsp;one pip is equal to&nbsp;0.0001,&nbsp;the fourth decimal place in the quoted price.</p></li></ul><p><strong>Calculation Based on Quoted Price Format:</strong></p><ul><li style="font-weight: bold;"><p><strong>Major Currency Pairs (e.g., EUR/USD, GBP/USD):</strong></p><ul style="font-weight: initial;"><li><p>These pairs are typically quoted with four decimal places.</p></li><li><p>One pip for EUR/USD or GBP/USD would be 0.0001,&nbsp;calculated as the smallest change in the quoted price (e.g.,&nbsp;from 1.1234 to 1.1235).</p></li></ul></li><li style="font-weight: bold;"><p><strong>Japanese Yen Pairs (e.g., USD/JPY):</strong></p><ul style="font-weight: initial;"><li><p>JPY pairs are commonly quoted with two decimal places.</p></li><li><p>One pip for USD/JPY would be 0.01,&nbsp;calculated as the smallest change in the quoted price (e.g.,&nbsp;from 132.62 to 132.63).</p></li></ul></li></ul><p><strong>Exceptions to the Rule:</strong></p><ul><li><p>Some minor currency pairs might have different pip values based on their exchange rate and quoting conventions.</p></li><li><p>Always check the specific price format and pip value information provided by your trading platform or broker to ensure accurate calculations.</p></li></ul><p><strong>Additional Factors:</strong></p><ul><li><p>The pip value also determines the value of each pip movement in your trading account currency.</p></li><li><p>For example,&nbsp;with a USD account and EUR/USD at 1.1234,&nbsp;a 1 pip move (0.0001) would equal $0.0011234 (1.1234 x 0.0001).</p></li></ul><p><strong>Remember:</strong> Understanding how pip values are calculated for different currencies is crucial for accurately assessing potential profits and losses in your trades. Don't hesitate to consult your trading platform or broker for specific information regarding pip values for the currency pairs you trade.</p>