Need help for teaching calculate the value of a pip

Beginner Questions
1

hi , i m learning the biginner guide from the school , but i stuck at the lesson
What is a Pip in Forex ?
as show as below

As each currency has its own relative value, it’s necessary to calculate the value of a pip for that particular currency pair. In the following example, we will use a quote with 4 decimal places. For the purpose of better explaining the calculations, exchange rates will be expressed as a ratio (i.e., EUR/USD at 1.2500 will be written as “1 EUR/ 1.2500 USD”)

Example exchange rate ratio: USD/CAD = 1.0200. To be read as 1 USD to 1.0200 CAD (or 1 USD/1.0200 CAD)

(The value change in counter currency) times the exchange rate ratio = pip value (in terms of the base currency)

[.0001 CAD] x [1 USD/1.0200 CAD]

Or Simply

[(.0001 CAD) / (1.0200 CAD)] x 1 USD = 0.00009804 USD per unit traded

Using this example, if we traded 10,000 units of USD/CAD, then a one pip change to the exchange rate would be approximately a 0.98 USD change in the position value (10,000 units x 0.0000984 USD/unit). (We use “approximately” because as the exchange rate changes, so does the value of each pip move)

my culculate is 1.0200X1 USD = 1.0200 ，how could be 0.00009804 ?
i m stuck at this lesson four day and i cannot go to the next lesson because i cannot understand how to culculate the value of a pip ! please teach me ,thank you very much .

2

The School has done the calculation correctly.

You have omitted a portion of the equation, specifically the portion highlighted in red, below:

[(.0001 CAD) / (1.0200 CAD)] x 1 USD = 0.00009804 USD per unit traded

The equation is .0001 CAD divided by 1.0200 CAD times 1 USD = 0.00009804 USD per unit traded

.

3

Theres a Pip Calculator in the Tools section above

4

thank you for reply my question
but as a moron , i have try to culculate it as below
0.0001 CAD devide/ 1.0200 CAD Xtimes 1 USD = 9.803921568627541
how to get 0.00009804 ? i really dont understand ,
can someone explain the simplest way to help me understand where the point i have mistake ,
your reply to me is very precious, thank you very much .

5

Somehow, you have a decimal point way out of place.

[B]It appears that you are dividing 10.000 by 1.0200[/B]

Let’s simplify this equation.

Let’s remove the units (CAD and USD), and just use pure numbers.

And, let’s round off your result to 4 decimal places.

Finally, let’s drop the “times 1”, because multiplying by 1 doesn’t change anything.

Previously, you got this result: 0.0001 / 1.0200 = 9.804 (rounded off). Which is wrong.

You should get: 0.0001 / 1.0200 = 0.00009804

Please try it again. And be very careful with your decimal places.

6

hihi
i the past few day , i have been try many time to understand how to culculate the value a pip by folowing your teaching , but i really cannot have the result 0.0001/1.0200 = 0.00009804

my culculation is still have the same result 0.01/1.0200 = 0.09804 < correctly , but why the result of 0.0001/1.0200 = 9.804 , not 0.00009804 ? i m using my computer culculator,is so sad . what is the problem my mathematics .

7

No, that is not correct.

0.01 / 1.0200 = 0.009804

Try a different calculator.

8

Use a pip calculator which does the math for you, as far as using a regular calculator you should get the same result. You can’t really mess up too much when typing 0.0001 / 1.0200. Make sure your decimals are right.

9

Try this formula: Example EURUSD
Profit from one pip = 100000 × pip size of the instrument (0.0001) × Lots (0.01) × Cost of the second currency in the pair (USD) × Open positions (1)

Or you can simply use this [B]PIP calculator[/B]

10

Every Trader needs to be able to do these calculations manually. I don’t think using a calculator will help on the long run

11

We covered the subject of the Pip Value in the post
How much is Mr. Pip worth?

Have a look and share your opinion . We kept it as simple and step-by-step as possible. Do NOT trade till you can determine the pip value in USD for any of your trades in the blink of the eye!

#Keepitsimple

12

Hi hawcheah,

Lets put it in another way.

Lets imagine that in EUR/USD, EUR is a good and USD is a money. When exchange rate goes down it means that you have to pay less money (USD) for a good (EUR), and vice versa when exchange rate goes up. As exchange rate fluctuations is a change in money (USD), then pip value should be also measured in “money” fractions.
For example exchange rate on EUR/USD went from 1.1123 to 1.1122. There was a change in 1 pip or a change by 0.0001 USD. So pip value in USD (“money” or quote currency) will be 0.0001 USD. For 0.1 lot volume this will be 0.0001*10000 = 1$, for 1 lot = 10 USD. So the pip value for quote currency (XXX/YYY where YYY - quote currency) will be always 0.0001
To calculate pip value for base currency (“good” or XXX/YYY where XXX - base currency) just divide pip value of quote currency to exchange rate. That’s it
But to avoid this tedious calculations and save time for something more important I use pip value calculators, for example this from my broker http://bit.ly/1MEZEpk
Good luck and don’t hesitate to ask more questions.

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