WHAT IS A PIP?

The mainly familiar increment of currencies is the PIP. If the EUR/USD moves from 1.2250 to 1.2251, that’s a pip. A pip is the last decimal of a quote. PIP is how to measure your gain or loss.



As every coin has its own value, it is necessary to calculate the value of a pip for that currency. In currencies, where the United States dollar is cited first, the calculation is as follows.

Take USD / JPY at 119.80 (the announcement of this currency pair only goes to two decimal places, most other currencies, with four decimal places)

In the case of USD / JPY, 1 pip would be .01

Therefore,

USD / JPY:

119.80
01 Divided by the exchange rate = pip value
.01 / 119.80 = 0.0000834

This seems a very long number but later we will discuss lot size.

USD / CHF:

1.5250
Divided by the 0001 exchange rate = pip value
.0001 / 1.5250 = 0.0000655

USD / CAD:

1.4890
Divided by the 0001 exchange rate = pip value
.0001 / 1.4890 = 0.00006715

In the event that the U.S. dollar not quoted first and we want the U.S. dollar value, we must add another step.

EUR / USD:

1.2200

Divided by the 0001 exchange rate = pip value
so
.0001 / 1.2200 = 0.0008196 EUR

but we have to return to U.S. dollar so we add another calculation which

EUR x exchange rate
So
0.0008196 x 1.2200 = 0.00009999

Rounding would be 0.0001

GBP / USD:

1.7975

Divided by the 0001 exchange rate = pip value
So
.0001 / 1.7975 = GBP 0.0000556

But we must return to U.S. dollar so we add another calculation which

GBP x Exchange rate

So
0.0000556 x 1.7975 = 0.0000998

Rounding would be 0.0001

You're probably rolling your eyes back and think what they really need to work all this and the answer is no. Nearly all forex brokers that all this work for you automatically. It's always good that you know how to solve it.