Let’s learn how to calculate Pip Value simply!
Knowing the “Pip Value” is very important to understand profit, loss and market price movement.
But it is, actually very simple.
Simple Example ①
If you are trading 1 lot which is 100,000 units(USD),
one pip value of EUR/USD is 10 USD.
If the price moves 1 pip from 1.00000 to 1.00010, the difference of the price is 10 USD.
So in this case, you have made 10 USD of profit or loss.
Tip for you
1 lot = 100,000 units
1 pip value = 10 units
The formula to calculate Pip Value
If you like to calculate a Pip Value, you my use the below formula:
Pip Value = (One Pip / Exchange Rate) * Lot Size
and here is an example of using the formula above.
One Pip: 0.0001
Account Base Currency: EUR
Currency Pair: EUR/USD
Exchange Rate: 1.08962 (EUR/USD)
Lot Size: 1 Lot
⇩ ⇩ ⇩ ⇩ ⇩
Pip Value = 0.0001 / 1.08962 * 1
Each Pip is worth €9.18
This time, you just had to consider the “exchange rate” because the Account Base Currency and the Traded Currency are calculated in different currencies.
Are you bothered to calculate the Pip Value by yourself?
Go to XM Official Website, and proceed to “Research & Education”→”Forex Calculator”, where you can get instant results of any calculations.