What is pip in forex trade

Pip (Point in Percentage)

In forex trading, a pip (point in percentage) is the smallest unit of price change for a currency pair.

Definition:

A pip is the fourth decimal place of a currency quote. For example, if the EUR/USD currency pair is quoted as 1.1245, a one-pip move would be a change to 1.1246.

Pip Value:

The value of a pip varies depending on the size of the position being traded. It is calculated as follows:

«`
Pip Value = (Contract Size / Pip Value) Currency Pair Quote
«`

Contract Size: Typically 100,000 units of the base currency
Pip Value: 0.0001 (four decimal places)
Currency Pair Quote: The current price of the currency pair

Example:

Suppose you are trading 1 lot (100,000 EUR) of EUR/USD at a price of 1.1245. The pip value would be:

«`
Pip Value = (100,000 / 0.0001) 1.1245 = 10
«`

This means that a one-pip move in the EUR/USD exchange rate would result in a profit or loss of 10 USD.

Significance:

Pips are used to:

Measure price movements in currency pairs
Calculate potential profits and losses
Set stop-loss and take-profit orders
Track performance and analyze trade results

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