I’m struggling to understand how in forex money goes to four decimal places.
GBP/USD = 1.3407
How can you pay someone 1.3407??
You cannot. But you can have a bet with someone on which way the price moves.
You say “long” and a minute later the price is 1.3408, you win $10 per lot that you bet. If it’s 1.3406 you lose $10 per lot that you bet.
It’s only a bet. Not real money. GBP is not really exchanged into USD. Nor the opposite. 
If you actually wanted to change real currencies, at a bank, and you wanted to change £1,000 (UK) into USD, then you get S1,340.70, so then the “1.3407” means something.
But not if you just “trade” a CFD for forex.
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You can’t, but forex isn’t about trading $1, it’s about trading $100 000. When you start talking about big numbers, the last 2 digits make a big difference. In big money transactions this matters.
Then trading CFDs is essentially a simulation of real transactions of borrowing money, converting it from one currency to another and then converting it back after the rate has changed. All done by betting against your broker.
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By the way, I think this lesson will help you, also (and there are about 350 others there, too!) -
You can’t, but that question would be relevant only if you were changing £1 for someone, wouldn’t it? If you were changing £100,000 you would then pay them $134,070.00 rather than $134,060.00 or $134,080.00.
But the main thing to understand, as explained above, is that currencies don’t change hands anyway, for retail forex “trading”. It’s actually betting, not real trading. Have you looked at the (free) Babypips “School” pages?
yup thats how it works, and mathematically it can go beyond just four decimals, its more like how you look at it…
Not just mathematically but with forex brokers, also. Many use 5 decimal places.
I’ve read lots of articles on pips and no one of them have said it’s because of lot size. Investopedia even said a pip $0.0001. So it’s confusing
Investopedia is correct. A pip is $0.0001. $0.00001 is called a “pipette”, not a pip. It’s one tenth of a pip.
Still? It’s very well and clearly explained above, no?
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But you can’t pay someone $0.0001 in money. And none of the official websites are explaining why it’s possible.
You’re right about that point. But as everyone above has explained, that isn’t “mysterious” at all, and the decimal places are obviously needed to exchange larger amounts. I think it’s difficult for people here to understand exactly why that’s apparently still confusing for you. 
Because I would like to see somewhere official that explains it.
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I see. You want a link, really, not an explanation - and the Babypips School pages aren’t “official” enough for you.
Fair enough.
Maybe someone will produce a link to an “official” site that says what we’ve all been saying, above. Sorry I haven’t actually got one to offer you, myself, but good luck and welcome to the (unofficial) forum, anyway.
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Using four decimal places in financial calculations allows for greater precision, particularly when dealing with small fractional units of currency, like fractions of a penny. This can be crucial for accurate calculations, especially in situations where precise figures are needed for internal calculations or when dealing with complex financial transactions.
Why four decimal places?
Precise Calculations:
.
Using four decimal places can help maintain accuracy during calculations, especially when dealing with fractions of a penny.
Regulations:
.
Some financial regulations might mandate using four decimal places for specific calculations, like converting between currencies.
Interim Calculations:
.
In financial systems, calculations might involve intermediate steps, and using four decimal places can help maintain accuracy throughout these steps.
Financial Sector Standards:
Four decimal places are common in the financial sector for various calculations and reporting.
Net Asset Value (NAV):
.
For floating NAV money market funds, the expanded NAV (e.g., $1.0000) is required for transaction processing and display, according to the ICI | Investment Company Institute.
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The Forex market commonly uses four decimal places for quoting currency pairs, primarily due to the concept of a “pip”.
Here’s a breakdown of how it works:
1. Pips (Percentage in Points):
A pip is the smallest standard unit of price change in the Forex market for most currency pairs.
It typically represents a change in the fourth decimal place of a currency pair quote.
For example, if the EUR/USD moves from 1.1050 to 1.1051, that 0.0001 USD increase is one pip.
2. Four Decimal Places:
Most currency pairs are quoted to four decimal places.
This convention allows traders to easily track and measure price movements using pips.
3. Why Four Decimal Places?
Precision: Four decimal places offer a level of precision needed for Forex trading, where even small price movements can result in profits or losses, especially when leverage is used.
Liquidity: The Forex market is extremely liquid, and high-volume trading requires prices to be quoted with sufficient precision.
Standardization: The four-decimal-place convention has become a widely accepted standard in the Forex market, facilitating communication and understanding among traders globally.
4. Exceptions:
Japanese Yen (JPY) Pairs: Pairs involving the Japanese Yen are typically quoted to two decimal places. For example, USD/JPY might be quoted as 157.23. In this case, one pip is 0.01.
Fractional Pips (Pipettes): Some brokers quote prices with an additional decimal place, known as a fractional pip or pipette, which is one-tenth of a pip.
In summary: The use of four decimal places in Forex quotes, corresponding to the pip, enables precise price tracking and consistent measurement of price changes in the market.
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Is A.I.-generated text more, or less, ‘official’? 
What would be any other reason?
What would happen if it were 2 and EUR/USD was valued at 1. 50, and the price increased by 100 pips? The effect would be significant compared to the system we currently use.
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I just can’t decide whether the whole thread, or just parts of it, are serious, or joking, or trolling, or what?!
What’s occurring here, guys?
Have you nothing better to do on a Thursday?
Or is my calendar setting all wrong and April 1st has already come around again? 
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The man poses a question; it doesn’t bother me at all.
I guess i have nothing better to do 
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