What is a pip in a Forex?

what is a pip in a forex

One of the main things that each trader should learn is how to measure pip values and calculate profit and loss.

The unit of measurement that expresses change in value between two currencies is called a “pip”.

A pip is usually the last decimal place of a price quote.

If EUR/USD moves from 1.1070 to 1.1071, that .0001 USD rise in value is one pip.

Pip is the acronym for Price Interest Point, which is the smallest price move that a given exchange rate can make.

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Fractional Pips and Points

It is each broker’s commitment to provide the traders with access to the best fixed spreads and execution methods, and this is why you may at times noticed additional smaller numbers at the end of a currency rate.

These numbers are referred to as “Fractional pips” and they renew pricing feature which lets you see more price action detail and helps you make more informed trading decisions.

A fractional Pip is a tenth of a Pip and the addition of this feature to your account allows you to take advantage of smaller price increments and moves in the market.

Instead of quoting prices to 2 or 4 decimals, with fractional pips, they quote an extra digit.

For example, normally the EUR/USD ask would be quoted as 1.3251 while with fractional pips we quote 1.32518.

With the last smaller digit representing the fractional pip.

Deals of €100,000 and $50,000 may seem quite large, especially if you’re new to trading but this is where an important factor comes in, the use of leverage.

Leverage basically means you can trade larger amounts than your initial investment.

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Pip Value can be variable or fixed

Pip Value can be variable or fixed, depending on two factors:

  • The currency pair traded, (for example: EUR/USD).
  • The base currency, (for example: EUR of the EUR/USD currency pair is the measuring currency).

The Pip Value is also a function of the volume traded. The simplest formula to calculate Pip Value is:

(1 pip / Exchange Rate) * Volume = Pip Value

This number offers The Pip Value in the quoted currency.

If your account’s base currency differs from the quoted currency, simply multiply the quoted currency by the relevant exchange rate.

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What is Pip hunting?

Pip hunting is normally refer to the situation in which the Client opens a position and closes it in a very short time, usually trading incorrect spikes in the market, or taking advantage of feed indicative prices.

IronFX has the right to take any necessary actions similar to scalping clients, at its sole discretion, and without any prior written notice to protect itself since this action is prohibited.



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