Cross currency pip value... ??
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  1. #1
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    Default Cross currency pip value... ??

    Using the below examples and the order of math how do we calc the value for a USD account trading a pair that does not contain the USD as in the EUR/CHF or other cross currencies... ??

    How do i use a USD quoted EUR/USD or a non USD quoted USD/CHF to convert the pip value into USD... ??

    Please use the "(tick/quote) x lot" order of math like the USD/XXX pairs in the example below instead of the tick*lot/quote as it makes more sense to me... =]

    TY

    Let's assume we will be using a 100,000 unit (standard) lot size. We will now recalculate some examples to see how it affects the pip value.

    USD/JPY at an exchange rate of 119.80 (.01 / 119.80) x 100,000 = $8.34 per pip
    USD/CHF at an exchange rate of 1.4555 (.0001 / 1.4555) x 100,000 = $6.87 per pip
    In cases where the U.S. dollar is not quoted first, the formula is slightly different.

    EUR/USD at an exchange rate of 1.1930 (.0001 / 1.1930) X 100,000 = 8.38 x 1.1930 = $9.99734 rounded up will be $10 per pip
    GBP/USD at an exchange rate or 1.8040 (.0001 / 1.8040) x 100,000 = 5.54 x 1.8040 = 9.99416 rounded up will be $10 per pip.

  2. #2
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    The value of the position will be determined by the USD rate vs. the base currency. The math is simple. If you're trading EUR/CHF, for example, the value of the position is EUR/USD x the trade size.

    Thus, if you're long 100,000 EUR/CHF and EUR/USD is quoted at 1.40, the position value is:

    100,000 x $1.40 = $140,000

    Now, if you're talking about pip values, you need to use the quote currency against the dollar. Again, using the EUR/CHF example, that means taking the EUR/CHF pips made or lost and dividing by USD/CHF.
    Last edited by rhodytrader; 11-22-2011 at 09:04 AM.
    John Forman
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  3. #3
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    So i am refering to pip value...

    in the example:
    USD/CHF at an exchange rate of 1.4555 (.0001 / 1.4555) x 100,000 = $6.87 per pip
    Trading the USD/CHF will give me a profit/loss of $6.87 per pip on a standard lot.

    Are you saying that trading EUR/CHF will be the same $6.87 per pip... ??

    Also how can i use the EUR/USD to convert the EUR/CHF pip value to USD amount... ??

  4. #4
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    Follow the same formula, but think in EUR terms rather than USD. Thus, EUR/CHF at an exchange rate of 1.2000 (0.0001/1.2000) x 100,000 = EUR8.33 per pip. Multiply that by EUR/USD and you get $/pip. If EUR/USD is 1.4 then it's $11.67 per EUR/CHF pip.

    That's unnecessarily complicated, though, because you're doing two calculations - first to convert CHF into EUR and then to convert EUR in to USD. EUR/CHF gains or losses are valued in CHF pips, so if you just divide that by USD/CHF you get the same answer.
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  5. #5
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    would anyone know what value to use (bid, ask, average of bid and ask) for the quote symbol's USD-rate in a cross-currency pip value calculation

    e.g. let's say we want to calculate the pip value of AUDCAD - so we need some "current" rate from USDCAD, but what exactly is a "current rate"?

  6. #6
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    Quote Originally Posted by ycomp View Post

    would anyone know what value to use (bid, ask, average of bid and ask) for the quote symbol's USD-rate in a cross-currency pip value calculation
    Short answer: Use the ASK price.


    Long answer:

    I don't know why the Babypips Pip-Value Calculator doesn't specify which price to use --- maybe it's because it doesn't make a whole lot of difference, as we'll see in a moment.

    We can compare the results calculated by the Babypips Calculator with the results calculated by the EarnForex Calculator. EarnForex asks specifically for the ASK price of the USD/CAD (using the pair in your example). If we assume an ASK price of 1.3216, both of these calculators return a value of $7.5666 per pip (per standard lot) rounded off. Note that EarnForex returns pip-value results to 15 decimal places --- which is pretty ridiculous for our purposes.

    Here are the two calculators, if you want to play around with them:



    Some online pip-value calculators return strange results. Consider the Cashback Forex calculator ---


    At first glance, it looks really handy, because you don't even have to enter a price. All you have to enter is the pair you want to trade, your account currency, and your position size (and whether you want the result per pip --- which is the default --- or for some other number of pips). Obviously, this calculator is using its own internal prices for all of its calculations.

    Okay, let's try it. We plug in AUD/CAD, 1 lot, and Results in USD. The answer given: $7.5586 --- not quite the same as the Babypips and EarnForex results. There's no way to confirm what USD/CAD price this calculator was using. But, by trial-and-error using either the Babypips calculator or the EarnForex calculator, we can determine that a USD/CAD ASK price of 1.3230 yields the result obtained from the Cashback calculator.

    The market is closed right now (Sunday morning, about 6am New York time), so maybe that explains the difference of 14 pips in the ASK price of USD/CAD. Every website (and trading platform) is reporting Friday's closing prices, which often vary widely from broker to broker.


    Before we get any deeper into the weeds here, let's talk about whether small differences matter, when calculating floating pip-values.

    Whenever the quote currency in a traded pair does not match the account currency, the relevant pip-value is referred to as a floating pip-value, meaning that it changes while the trade is open. To use your AUD/CAD example, whenever the price of USD/CAD changes (while this trade is open), the pip-value will change. The opening pip-value and closing pip-value can be quite different.

    Given this fact, how important is the difference between $7.5586 per pip and $7.5666 per pip? That's a difference of $0.008 (8/10 of 1¢). As a percentage of the $7.56 pip-value, it's about 1/10 of 1%. And, as we already found out in our trial-and-error experiment above, that difference corresponds to just 14 pips in the USD/CAD price. The USD/CAD price can move 14 pips in a few minutes.

    I think these small differences in pip-values can be ignored. And maybe that's why the Babypips Pip-Value Calculator doesn't even specify which USD/CAD price to enter. But, since you now know that the correct answer is the ASK price, you might as well use ASK prices.


    One final point. For some unknown reason, the Babypips Pip-Value Calculator requires you to enter the current ASK price for the pair you are trading. However, this price has nothing to do with the calculation being performed. You can prove this to yourself by entering various prices and re-calculating. You will find that you get the same answer, no matter what you plug into that field --- provided you don't plug in ZERO, or leave it blank.

    You can even plug in a totally ridiculous price --- like 765.4321 --- and the Calculator will happily calculate the correct pip-value for you. I mentioned this to Babypips a couple of years ago, but they haven't adjusted the Calculator.

    .
    Last edited by Clint; 03-13-2016 at 06:14 AM.

  7. #7
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    great, thanks for the detailed explanation.

    it is for code so I thought it is better to be more precise.

    So it's always ask? even if the usd-pair was the other way 'round?

    Let's say when looking up the rates for AUDUSD (for the cross pair: EURAUD) instead of USDCAD (AUDCAD) ?


    Quote Originally Posted by Clint View Post
    Short answer: Use the ASK price.


    Long answer:

    /snip/
    .

  8. #8
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    Quote Originally Posted by ycomp View Post

    So it's always ask? even if the usd-pair was the other way 'round?
    Short answer: Use the ASK price.

  9. #9
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    What is gold xagusd pip value , on one lot? I need short answer

  10. #10
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    Quote Originally Posted by Markaria400 View Post

    What is gold xagusd pip value , on one lot? I need short answer
    Gold is not XAG --- that's silver.

    Gold is XAU.

    Tick values (not pip values):

    XAG/USD $5 per 5000 oz. lot

    XAU/USD $1 per 100 oz. lot

    .
    Last edited by Clint; 04-22-2016 at 03:55 AM.

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