Forex pip movement monetary value

Pls I have a big problem in having a clear
view of what this pip actually entails my question goes like this we all know that pip is a measure of the smallest movement in a currency pair and also by my perception of how large the forex market is I believe a pip movement in a currency cannot be caused by a small amount of money so therefore my number question is this
»Pls what is the estimation of how much of a currency that can be ttaded in the fx market. For one movement in value of the currency to occur

»»And also is the value of a currency pair example derived from the volume of transcation that takes place in converting one currency of the pair to the other of the currency pair example gbp\usd ~2.0005 pls is this vaue derived from only the conversion of maybe gbp to usd and vice versa

Hi and welcome to the forum, Timothy.

You seem a little confused about basic terminology, and some of what you say that you “already know” isn’t quite accurate, as well.

I strongly recommend that you read through the “School” pages, here: School of Pipsology | Learn Forex Trading. Some of your questions are answered in the section called “Preschool”, and I think the section covering “quote currency” and “base currency” answers your other question.

It isn’t possible meaningfully to estimate how much of a currency has to be traded to move the price by a pip: this depends on a huge range of variables, including the current amount of buying pressure and selling pressure, the time of day, and many other things, too.

So you are trying to say that a pip movement is not necessary assumed by say a particular volume of trade then if it is so it means that during something like all this kind of pressure you talk about on a currency
»» Does it means that currency is being fixed by a particular body

Let’s forget currency for a moment and talk about any widely traded commodity that’s bought and sold. Let’s say bricks to build houses.

It’s an economic reality that buying pressure (which some people call “demand”, but that term isn’t appropriate in forex and shouldn’t be used) increases the price, and selling pressure (“supply”) decreases it, isn’t it? If lots of house-builders get busy and need millions of bricks, their price will increase a little. If loads have been manufactured and building slows down because there’s less need for houses, then their price will go down due to “overstock” or whatever, won’t it (the wholesalers and builders’ merchants don’t want millions of bricks lying around unsold and filling the warehouse, so they reduce the price a bit)?

You’re a builder and you want to buy bricks …

So let’s say 100,000 bricks are for sale at 8 units each, and then some more are available, but at 8.5 units each (one pip higher, because the pip-size for bricks moves in half-units).

If you want to buy 10,000 or 20,000 or 30,000 or … 70,000 or 80,000 or 90,000 bricks, the price is 8 units each.

If you buy 50,000 bricks, you pay 8 units each. And the next builder after you can still buy 50,000 bricks at 8 units each.

To increase the price of the bricks, you’d have to buy over 100,000. That’s quite common, for bricks. :wink:

Now let’s imagine you bought 99,999 bricks (8 units each). Along comes another builder and he wants to buy bricks.

At this moment, he will only have to buy [B][U]one brick[/U][/B], to put the price up to 8.5 units, won’t he?

So, most of the time, you need to buy a large amount to put the price up 1 pip. But occasionally you only need to buy a tiny amount, to put the price up 1 pip. (In the case of currencies, even that “tiny amount” is probably more than any retail trader will ever buy. Don’t imagine that your trades will ever “move the interbank market”. They won’t. But you might in any case be trading against a counterparty market-maker, not in a real market. And that makes it even harder to answer because then the answer depends on your own broker.)

Bricks are just like currencies. They’re traded in a free market. The prices are responsive to buying pressure and selling pressure. Buying pressure and selling pressure, whatever causes them, are responsible for [B][U]all[/U][/B] price movements. [I][U]Those are the mechanics of how the market works[/U][/I].

Do you see, now, why there isn’t and can never be a [U]fixed[/U] answer to the question you’re asking? It depends on how much is for sale at that price. And that depends on who bought what, and when, and for what price, and what time of day it is, and which way the wind’s blowing, and on a few other things as well. :slight_smile:

No. It doesn’t mean that. The interbank market is made up of lots and lots of different banks and financial institutions, just like the league of brick-suppliers is made up of lots of different wholesalers, and there’s a “going rate” for the price. But if you use a counterparty market-maker as a broker, then your own broker isn’t [I]really[/I] a broker and can trade against you and fix the price [U]you[/U] pay. This post explains more.

Thankyou for your reply and God bless you

Thanks and you made things very clear for the newbies :wink: