I have mainly been trading EUR/USD, AUD/USD and GBP/USD which all have the same sort of Pip value 0.0001 and so I understand how this relates to the spread charged by the broker. However I was considering trading some USD/JPY but the pip value is 0.01 but the spread charged for all currencies is around 2.5.
So I’m thinking the spread charged on USD/JPY is really going to cost 10 times more than the other currencies if I want the same sort of profits as the other currencies, as the daily movement is much lower in pips?
If so i’m curious how or why other people trade this currency when the charge is so much higher, is it easier to predict or less volatile?
A pip is still a pip, and the value of each is still very close respectively, given the difference of conversion rates.
EUR/USD is how many dollars you can buy for one euro. Right now you can buy roughly 1.25 dollars for every euro. A pip is derived from breaking that last digit down to 1/100. That shows up as 1.2500. If price went to 1.2501, you would have a one pip gain.
USD/JPY is how many yen you can buy for one dollar. Right now you can buy roughly 80 yen to a dollar. Breaking that down to a pip adds a decimal, and two more digits: 80.00. If price rose to 80.01, you would have the same one pip gain that you did on the euro. And if the yen ever drops back down to 100 yen to the dollar again, you’d even have the same amount of digits overall. 1.2500 E/U, and 100.00 U/J.
It doesn’t cost more to trade the USD/JPY, nor are you risking a greater amount because you have two less digits.
Hmmm … Last time I checked… Been awhile, I don’t like trading yen pairs, but a 1 pip move on a usd/jpy position gave me about 12 dollars on a standard lot… Whereas a 1 pip move gave me 10 dollars on a standard lot of EUR/USD. So if the spread is equal for both pairs, let’s say two pips, the actual spread cost is 1.2 times more for the USDJPY pair at 24 dollars vs 20 dollars for EURUSD.
So in the school example USD/CAD is .98 per pip (with a 5 digit price) vs GBP/JPY = .81 per pip (with a 3 digit price)…which is not a 10 times difference. The biggest factor for pip values of that difference is changing your lot size.
Now you ask about the “charge”…which I equate to being the spread which is how many pips price must go to cover the spread. There can be a big difference there. The EURUSD can have a spread of 1 or 2 pips, vs the GBP which can have a 10 pip spread. Each pair is different and brokers fluctuate the spread for whatever reason.
Then there are some pairs that are more or less volatile than others irrelevant of their pip value, and/or spreads, like the GBPJPY which some people avoid like the plague, and others embrace it…depends on your risk tolerance.
When you compare usdjpy to eurusd you are actually comparing the eur to the usd. Since a pip in the eur is compared to a pip in usd which is not the same value the pip will be of different value.
To get same pip value, you should adjust your position size at the time of entry accordingly. Adjusting position can bring same pip value, same risk, same reward and same charges for EURUSD and USDJPY.
For example,
Pip value for 1 standard lot of EURUSD = $10.00
Pip Value for 0.8 standard lot of USDJPY = $ 10.00
By adjusting position size you will get same pip value and reward for EURUSD and USDJPY with same risk.
What everyone else has said here is spot on. The pip value for USD/JPY trades is about the same as for other currency pairs even though the decimal point is in a different place. It might help you to see an example of the math behind this.
Suppose someone buys 1 microlot (1000 units) of USD/JPY at 81.14 and then sells it for a 1 pip profit at 81.15. How much money did he make?
He bought $1000 and paid 81,140 yen. He then sold those $1000 for 81,150 yen. That means his profit was 10 yen for a 1 pip move. We can get the US dollar equivalent by dividing 10 yen by the USD/JPY exchange rate of 81.15 and get 0.12. So the pip value for USD/JPY on 1 microlot is 12 cents.
How does that compare with EUR/USD?
Suppose the same trader buys 1 microlot of EUR/USD at 1.2778 and then sells it for a 1 pip profit at 1.2779. How much did he make?
He bought 1000 Euros and paid $1,277.80 He then sold those 1000 Euros for $1,277.90. That means his profits was 10 cents on a 1 pip move. So the pip value on EUR/USD is 10 cents, while the pip value on USD/JPY is 12 cents.
These examples show that for any currency pair, it’s the second currency that determines the value of a pip. Below is a screenshot of the Simple Dealing Rates window on the Trading Station platform. In it you can see the pip value or pip cost for each currency pair. Notice that all the yen pairs have a pip value of 12 cents.
Most pairs with bigger spread are more volatile than those with small spread so if you catch the trend at the right time you are more likely to collect a big profit within a shorter time than the docile ones but the same is also true for losses.
It would appear that there is no correlation positive or negative between volatility and spread size.
That said, trend following should be undertaken without any consideration for spread size in the same way that good beer should be enjoyed without regard to the level of psilocybin.
I think it will depend on trader’s money management to trade with higher pips value and trader’s capability to control risk to take. It’s not easy to trade with high spreads like GBP/JPY, SILVER, GOLD, etc but it can be more profitable if you can manage profit and loss when you’re trading with it. Higher spreads usually will be higher volatility so it can give more profits when you could take advantage on it.
As my fellow pippers have already answered your query, it really doesnt cost you much to trade in the USD/JPY in comparison to any other currency pairs. Ultimately it can not exceed anything more than a pip value. Thus enjoy trading, be more logical in trading.
Could you explain why do you think that USD/JPY is more profitable than mostly other currency pairs? For me, it is better to master one pair at a time until you could gain consistent profit before you use higher lot size to trade. In the title of thread said how to trade higher pip value, you should use higher pip value when you’re not ready to use higher lot size value. Good traders must know the risk in trading too beside its possibility of profit.
