Thursday, April 13, 2006

Pip calculation

A pip is the smallest increment a currency can move. Currency is usually quoted to four decimal places.

e.g AUD/USD 0.7293

A pip represents a $AUD 0.0001 in above example.

Now we know what a pip is. What is it worth?

We divide one pip by current price: AUD/USD 0.7293

0.0001/0.7293= AUD $0.00013712

Now we convert to USD (or whatever currency your account is in)

0.00013712 * 0.7293 = USD $0.0001

We now multiply by lot size to get the profit/loss from one pip.

0.0001 * 100 000 = $10 per pip.

More in depth explanation can be found at Baby Pips.

No comments: