Good day all,
Just a simple question as a newbie, how does the formula;
0.0001/[currency pair ratio]
derived to the value of a pip?
please enlighten me.
Nivka.
Hello, Nivka. Welcome to this Forum.
I’m not sure how to use the formula you have asked about.
Here are two of my previous posts on the subject of calculating pip-values, which might clear things up for you.
http://forums.babypips.com/newbie-island/40678-math-behind-pip-value.html#post280087
http://forums.babypips.com/newbie-island/40678-math-behind-pip-value.html#post280099
Most traders do not do these long, manual calculations. Instead, either (1) they rely on their trading platforms to furnish pip-values, or (2) they use a pip-value calculator.
You can access the Babypips pip-value calculator by clicking [B]Tools[/B] > [B]Forex Calculators[/B] > [B]Pip Value Calculator. [/B]
Here’s a direct link — Pip Calculator: Free Online Forex Pips Calculation Tool for Traders
This only works when USD is one of the currencies being traded.
If usd is the quote currency (xxxusd) then the dollar value of a pip is 0.0001 times the position size.
If usd is the base currency (usdxxx) then it’s 0.0001 times the position size divided by the exchange rate. But with yen, you use 0.01 instead of 0.0001.
Hello Clint and timothyblack235,
The replies had been of great help in working all the questions I have and to my surprise, I still have much to learn.
Thank you!
Best regards,
Nivka.