Calculation of PIPs

Beginner Questions
1

Hi All,

Newbie here… was trying to figure out on the following as i found that the calculation (highlighted in red) is kinda wrong in the example. Tried calculating but couldn’t really get the amount correct. Isn’t [(.0001 CAD) / (1.0200 CAD)] x 1 USD = 9.0839 USD?

Is anyone able to share some lights here? Thanks!

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Example exchange rate ratio: USD/CAD = 1.0200. To be read as 1 USD to 1.0200 CAD (or 1 USD/1.0200 CAD)

(The value change in counter currency) times the exchange rate ratio = pip value (in terms of the base currency)

[.0001 CAD] x [1 USD/1.0200 CAD]

Or Simply

[(.0001 CAD) / (1.0200 CAD)] x 1 USD = 0.00009804 USD per unit traded

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p/s: the above was extracted from “What is a Pip in Forex” from Pre-school chapters.

Regards,
Zex.

2

+++
[(.0001 CAD) / (1.0200 CAD)] x 1 USD = 0.00009804 USD per unit traded
(10,000 units x 0.0000984 USD/unit).
+++
should read 0.00009804
i make (0.001 / 1.0200) * 10000 = 0.98039 (approx 0.9804).

// usually standard lot is 100,000 (?!) so would be 9.8039.
https://en.wikipedia.org/wiki/Percentage_in_point

i use a bit of code…

   
double myPipCost = 
NormalizeDouble((((MarketInfo(Symbol(),MODE_TICKVALUE)*Point)/MarketInfo(Symbol(),MODE_TICKSIZE))*1),2);
if (Digits==3 || Digits==5) {myPipCost=myPipCost*10;}
3

You could always use a pip calculator.

4

It’s right calculation I guess. When I don’t know the math behind trading I check it with my Hotforex demo I mean open demo trades to check spreads with different lot sizes and different and then try to figure out equations behind them

5

Hi Zex,

Below is an example to explain the value of 1 pip on USD/CAD on a micro lot which is 1000 units of currency (AKA 1k on Trading Station or 0.01 lots on MT4).

Suppose you bought 1 micro lot of USD/CAD at 1.2314 and then sold it for 1 pip profit at 1.2315. Here’s a breakdown of that trade. Buying 1 micro lot of USD/CAD at 1.2314 means you get 1,000.00 USD and pay 1,231.40 CAD for that purchase. Closing that trade for a 1 pip profit at 1.2315 means you sold 1,000.00 USD and received 1,231.50 CAD for that sale.

Therefore, your 1 pip profit equates to a 0.10 CAD (1,231.50 - 1,231.40). To convert this to USD, you must divide 0.10 CAD by the USD/CAD exchange rate of 1.2315 to get 0.0812 USD or approximately 8 cents.

Note that the Trading Station platform already computes the value of a pip for each currency pair and displays it in the Pip Cost column of the Simple Dealing Rates window.

776×934

Welcome to BabyPips! :slight_smile:

Jason

6

Hi All,

Thanks for the replies! i’ll try to look through the calculation again as informed…

Hi LastBear,

Thanks… but i just wish to understand the calculation for the sake of my own curiosity :slight_smile: