Question: How to calculate "Pip Value"?
In major pairs quoted against the US dollar, we calculate the value of a PIP as follows:
The EURUSD has an exchange rate of 1.3130. If 1 pip = 0.0001, we divide 0.0001 by 1.3130.
Which gives us a pip value of 0.0000761 Euros.
Let’s turn this into a Forex deal, to see what the pip would represent in either a profit or loss.
Deal 1:
Sell €100,000 worth of EUR/USD and 1.3130.
Pip value in Euro terms is 0.0000761 * 100,000 = €7.61, or exactly $10.
If the deal is closed at 1.3120 with 10 pip profit the total profit would be €76.10 or $100.
Deal 2:
Buy $50,000 worth of USD/JPY at 77.60.
Pip value in dollar terms is 0.01 / 77.60 * 50,000 = $6.44 or exactly 500 yen.
If the deal is closed at 77.50 with a 10 Pip loss, the total loss will be $64.43 or 5,000 Japanese yen.