Please how to do calculate the PIP value of a currency pair that neither of the two currencies are in the currency of your trading account, Like for instance is you are trading EURJPY and the amount in your trading account is in dollars, what is the formulae or way of calculating it.
Hello abriks. Welcome to this forum.
Using your example, here is how the calculation is done.
Let’s say you are trading one mini-lot of EUR/JPY in your USD-denominated account. Let’s say from the time of your entry, to the time of your exit, the EUR/JPY moves 100 pips in your favor. In other words, you have earned a profit of 100 pips in the pair you were trading. And let’s say that when you exited your EUR/JPY trade, the price of USD/JPY was 107.80.
Let’s break the pip-value calculation down into its basic parts.
1. What is a pip?
A pip is a fraction of one unit of the QUOTE CURRENCY in the pair traded. In the example above, one pip is 1/100 of one yen. We can write this as one pip = ¥0.01
So, if you traded ONE UNIT of EUR/JPY, and earned a profit of one pip, that pip would be worth ¥0.01
But, you don’t want the pip-value in JPY. You want it in USD.
Furthermore, you were not trading one unit of EUR/JPY. You were trading 10,000 units (one mini-lot).
And finally, you didn’t earn a profit of just one pip. You earned a profit of 100 pips.
So, how do we use those metrics to calculate your total profit in USD?
2. How much is one pip per unit of EUR/JPY worth in USD?
For this, we use the USD/JPY exchange rate. At the time you closed your trade, USD/JPY was 107.80
This means, $1 = ¥107.80. Therefore, ¥1 = $1 / 107.80 = $0.009276
In other words, for every UNIT of EUR/JPY in your position, every pip of profit was worth $0.009276
3. You traded 10,000 units of EUR/JPY, and earned 100 pips. So, what was your total profit?
This is simple multiplication.
$0.009276 per unit of EUR/JPY per pip of profit x 10,000 units x 100 pips = $92.76
Can we verify this result?
Absolutely. The Pip-Value Calculator will compute the value of ONE PIP in terms of USD. Then, we simply multiply that result by 100 pips profit (in our example), and we will get the answer.
Here is a screen-shot of the Calculator, with the relevant metrics filled in, and the result shown —
The calculator is telling us that EACH PIP was worth 0.927644 USD.
So, 100 pips obviously was worth $92.76 — the same result we got doing the calculation by hand.