What Are Pips And What Is A Lot?

What are pips? PIP is a common form of a foreign currency value adding.

Example: EUR/USD moves from 1.2250 to 1.2251, that is 1 pip. PIP is the added value of each of the last decimal digit behind the comma. Of the value that we will know the pips of profit or loss. Keep in mind, as each currency has a value of each, so need to know how to calculate each of the existing values.

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Read also : What Is A Spread

OK, we just take the example of the pair USD/JPY is priced at 119.80 (note this is just Forex consists of 2 (two) decimal comma, while the other at the rear there is a four (4) following the decimal comma).

In the case of the pair USD/JPY is 1 pip is 0.01. So the calculation is as follows:

USD/JPY: 119.80 Forex price divided by 0.01 = 0.01/pip 119.80 value = 0.0000834

As for pairs that 4 decimal, then 1 pip is 0.0001, for example for the pair USD/CHF and USD/CAD, the calculation is as follows:

USD/CHF: 1.5250 0.0001 divided by the price of Forex pip value = 0.0001/1.5250 = 0.0000655

USD/CAD: 1.4890 0.0001 divided by the price of Forex pip value = 0.0001/1.4890 = 0.00006715

In the case of the other pair where the US Dollar is the currency of the indirect, for example for the pair EUR/USD and GBP/USD, the calculation is as follows:

EUR/USD: 1.2200 0.0001 divided by foreign currency price = value pip so 0.0001/1.2200 = EUR 0.00008196 Next to get US dollar then, the calculation is as follows:

EUR x price foreign currency so 0.00008196 x 0.00009999 = high Interpretation 1.2200 be 0.0001

GBP/USD: 1.7975 0.0001 divided by foreign currency price = value pip so 0.0001/1.7975 = GBP 0.0000556 to get the value of the US Dollar, then the calculation is as follows: GBP Forex price x so x = 1.7975 0.0000556 0.0000998 high Interpretation became the basic calculation That Pip is 0.0001 and value to be generated.

What is a lot?

OK, now we're talking about the next issue, i.e. the calculation of the Lot. The Forex market is traded in the form of lots. The default value per lot is $ 100,000. There is also a mini lot with a value of $ 10,000. Or foreign exchange rate measured in pips, which is the smallest value adding to Forex or currency.

Assumptions: $ 100,000 per lot. Recount to know and influence on the value of the pip. USD/JPY exchange rate amounted to 119.90 (0.01/119.80) x $ 100,000 = $ 8.34 per pip with the USD/CHF exchange rate amounted to 1.4555 (0.0001/1.4555) x $ 100,000 = $ 6.87 per pip is another case where the US Dollar is not the base currency. The EUR/USD exchange rate of 1.1930 in (0.0001/1.1930) X EUR 100,000 = 8.38 x 1.1930 = $ 9.99734 ($ 10 per pip) GBP/USD with Exchange rates amounted to 1.8040 (0.0001/1.8040) x 100,000 = 5.54 GBP x 1.8040 = 9.99416 ($ 10 per pip).

How to calculate Profit/Loss?

After knowing Pips and Lot, let's get to know how to calculate Profit and Loss.

Example: Buy US dollars and Sell Switzerland Francs. Quote rate is 1.4525/1.4530. Because we Open Buy against US Dollar 1.4530 is used. Say we buy 1 lot for $ 100,000 at 1.4530. A few hours later the price moves to 1.4550 and decided to close the trade. The new rate quote USD/CHF is 1.4550/14555. Because we do Close Sell of Open Buy before then, the value used is the 1.4550. Difference between 1.4550 and 1.4530 is. 0020 or 20 pips. By using formulations which have been described previously, then (. 0001/1.4550) x $ 100,000 = $ 6.87 per pip x 20 pips = $ 137.40 remember, when getting in and out or Open and Close motion depends on the value of the Trade value of the spread (the difference between the Bid and Ask values).

Well, until here, hopefully you've been pretty clear about how to calculate the value of the pips and calculating profit/loss that you gained in trading.

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