Lucky Hit 24

One thing is sure, you can make money when you gain pips. Compare this term to the use of the unit of measurement in the stock market referred to as a point. With each price levels achieved, it should be fairly easy to mathematically determine the amount of movement in a particular currency as expressed in pips.

The off-exchange retail foreign currency market, also known as the “Forex” or “FX” market, is the largest financial and investment market in the world. But what is it, exactly? Forex investors employ various analytical methods (both fundamental and technical) in an attempt to predict price movement. Thus, becoming well versed in predicting these movements allows investors to profit from well-timed transactions. An important thing to keep in mind when trading with automated forex trading systems when trading in this fashion is your transaction costs. In EUR/USD a movement from 1.0066 to 1.0067 is one PIP, so a PIP is .0001. In USD/JPY a movement from 120.45 to 120.46 is one PIP, so a PIP is .01.

Perhaps the easiest way to understand how to calculate pip values is to start by looking at currency pairs involving the US Dollar. In this case the situation is simple because a pip will always have a value of $10. So, if you are trading GBP/USD and the market moves in your favor by 5 pips you will make a profit of $50. Let’s see this in action. Bearing in mind that a standard interbank lot size is 100,000 this means that 100,000 UK Pounds are worth 193,400 US Dollars.

It may so happen that they are quoting you a price, which is inaccurate. For example, the price is at 1.2000/1.2003. But the broker is quoting you 1.2002/1.2003. So, you go long at 1.2003.

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