How to calculate the Pips?

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1

Dear,

Kindly please be informed that I’m a new pip student. Would you please tell me how to calculate pips. I read the Pips lesson and It was difficult for me to understand it. That’s might because I am very weak at mathmatic !!!

Do you how any other easy way to understand this point or do you have a video which can explain more to me ?

Thanks and regards,
Omar Bassiouny

2

A pip is equal to: 0.0001 (or in the case of JPY Pip=0.01), so let’s say you buy EUR\USD at 1.3200, and then close your position at 1.3201, that means you made 1 pip (note that you need to take into account the spread(Ask-bid price), so in my example in reality you’re at a loss).
Now for how to calculate the value of a pip, you can find calculators all over the web, it will depend on 2 things:

  1. Your position size(Lots): 1 standard lot=100.000 base units, so if you multiply it by 0.0001 you get 10 of the quote unit.
  2. The Currency Pair
    If you go to “Tools” section here in BabyPips you’ll find all the tools you’ll need for FOREX trading.

Are you Egyptian?

3

Yes I am an Egyptian, why ?

In the example above you said I am at loss because the different is 0.0001 because I am buying, if I am selling the EUR this means I earned that different in dollars… right ?

4

I can tell from your name. I’m Palestinian.
No, you’re at loss because when you buy you pay the ask price, and when you sell you get paid the bid price. And Ask>Bid so basically you buy high and sell low, and the difference between the ask and bid is called the “Spread” which is the Broker’s profit. Depending on your broker the spread is usually above 1 pip for the liquid pairs ex. EUR\USD, and higher for other pairs. So in my previous example, if the spread was 1 pip, you’ll need to make 2 pips in order to gain 1 pip. But these issues only concern scalpers or those who hunt for small pips which I do not recommend for a beginner. Learn about swing trading and start from there.