What are Pips in Trading?

Pips are the smallest unit of movement in a currency. They measure how much a currency has moved in one direction against another.

For example, if USD is trading at 1.2000 against EUR, and then it moves to 1.1995, then the USD has gone down by 5 pips against EUR (1.2000-1.1995).

A pip is also known as points or points of percentage change on investment returns for securities that trade in foreign currencies. The difference in the fourth decimal place.

For JPY pairs we count it from the second decimal place.

For example USDJPY 109.24 -> 109.29 is 5 pips difference.

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For Gold (XAUUSD) we count it from the first decimal place 1891.10 -> 1891.60 is 5 pips difference.

How to use pips value to calculate $ ammount per trade (Quick calc)

My personal rule of thumb for off the cuff quick calculations on the expected risk or profit of trade goes like this: Rember this base calculation and quickly be able to calculate $ amounts expected for a trade.

Base: (Remember this)
0.10 Lots = 1$ per 1 pip

You can use this basic calculation to make rough calculations to know exactly what you're expecting when going into a trade.

Example 1: If for example, you have a 0.05 lot trade with 50pip stop loss you can multiply and divide accordingly. For example :

1$ x 0.5 (half of base lot size) x 50 (pips) ~= 25$

Example 2: If you have a 0.30 lot size trade with 70pip take profit:

1$ x 3 (three times base lot size) x 70pips ~= 270$

Precise web calculators

Before entering any trade, you should always know exactly how much you are risking per trade. There are many calculators online.

Personally I use a mobile app called "Stinu" it is by far the best lot size calculator there is but it is paid now I belive (worth it, will save you a lot of headache and losses in trading). Search for it on your mobile appstore.

Myfxbook has also a good one. If using our signals for calculation use asset EURUSD instead of XAUUSD for correct lot sizes for given pips.

Myfxbook forex calculator

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- Adrian

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