Pips and Pipettes

Here is where we're going to do a little math. You've probably heard of the terms "pips", "pipettes", and "lots" thrown around, and here we're going to explain what they are and show you how they are calculated.
Take your time with this information, as it is required knowledge for all forex traders. Don't even think about trading until you are comfortable with pip values and calculating profit and loss.

What the heck is a Pip? What about a Pipette?

The unit of measurement to express the change in value between two currencies is called a "Pip". If EUR/USD moves from 1.2250 to 1.2251, that is ONE PIP. A pip is the last decimal place of a quotation, given that four decimal places are used for pairs without the Japanese yen. If a pair does include the Japanese yen, then the currency quote goes out two decimal places.
Very Important: There are brokers that quote currency pairs beyond the standard "4 and 2" decimal places to "5 and 3" decimal places. They are quoting FRACTIONAL PIPS, also called pipettes. For instance, if GBP/USD moves from 1.51542 to 1.51543, it moved ONE PIPETTE.
As each currency has its own value, it is necessary to calculate the value of a pip for that particular currency. In the following examples, we will use quotes with 4 decimal places.

In currencies where the U.S. dollar is quoted first, the calculation would be as follows:
  1. USD/CHF at 1.5250

    .0001 divided by exchange rate = pip value
    .0001 / 1.5250 = 0.0000655
  2. USD/CAD at 1.4890

    .0001 divided by exchange rate = pip value
    .0001 / 1.4890 = 0.00006715
  3. USD/JPY at 119.80

    Notice this currency pair only goes to two decimal places (most of the other currencies have four decimal places). In this case, 1 pip would be .01.
    .01 divided by exchange rate = pip value
    .01 / 119.80 = 0.0000834
In the case where the U.S. dollar is not quoted first and we want to get the U.S. dollar value, we have to add one more step.
  1. EUR/USD at 1.2200

    .0001 divided by exchange rate = pip value
    So .0001 / 1.2200 = EUR 0.00008196
    BUT we need to get back to U.S. dollars so we add another calculation which is
    EUR x Exchange rate
    So 0.00008196 x 1.2200 = 0.00009999
    When rounded up it would be 0.0001
  2. GBP/USD at 1.7975

    .0001 divided by exchange rate = pip value
    So .0001 / 1.7975 = GBP 0.0000556
    BUT we need to get back to U.S. dollars so we add another calculation which is
    GBP x Exchange rate
    So 0.0000556 x 1.7975 = 0.0000998
    When rounded up it would be 0.0001
You're probably rolling your eyes back and thinking "Do I really need to work all this out?" Well, the answer is a big fat NO. Nearly all forex brokers will work all this out for you automatically, but it's always good for you to know how they work it out.
If your broker doesn't happen to do this, don't worry - you can use our Pip Value Calculator! Aren't we awesome?
In the next section, we will discuss how these seemingly insignificant amounts can add up.

Penulis : KalOo ~ Sebuah blog yang menyediakan berbagai macam informasi

Artikel Pips and Pipettes ini dipublish oleh KalOo pada hari 14 July 2011. Semoga artikel ini dapat bermanfaat.Terimakasih atas kunjungan Anda silahkan tinggalkan komentar.sudah ada 9 komentar: di postingan Pips and Pipettes


  1. I tried a play Forex account once. Confused the hell out of me, but I didn't try to figure it out for very long. Maybe I'll give it another shot.

  2. good info. i'll follow this blog and keep up-to-date!

  3. Thanks for the lesson. I'll be sure to check out the rest of this blog for more information on forex trading.

  4. Thanks! These things are good to know

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  6. You seem to know your stuff man! Definitely following you for this interesting info. Thanks!

  7. wow very nice post, thanks! its understanding