What is a pip and what is the benefit of knowing it in the forex market?

You can make profit and loss calculations in the forex market only by knowing pip. The term pip is actually an abbreviation of Point In Percentage, meaning the smallest unit of exchange rate in large financial markets such as Forex.

Not knowing the concept of pip is definitely associated with various problems, such as the inability to correctly set the profit and loss limit or not calculating the amount of profit in terms of pip. One ten-thousandth of the price of a currency pair is equivalent to one pip, so the fourth number after the decimal point is called a pip. The number that comes after a pipe is called a pipette. The fifth digit is the next decimal place. The pipette is not used for profit and loss calculations.

But there is an exception in the USD/JPY currency pair. Pip in this currency pair is the second digit after the decimal.

Forex trading may get a small profit with a big move, but on the contrary, it can get a big profit with a small change, and pips are the only reliable method to qualitatively check the profit of trading.

For example, imagine that the current price of the EUR/USD currency pair is 1.0001, but after some time, for example, a few hours have passed, its price changes to 1.0009. found and specifies the amount of pips, we will notice that it has increased by 8 pips in the meantime.

The valuation of each pip is based on two factors, the amount of your capital in each transaction and the goods you intend to buy or sell. For example, for the trading volume of one lot in forex (capital $100,000), the value of each pip is approximately $10.

Pips are used by the industry to influence your brain so that you think you are buying something tangible which is real, and also that 1 pip in each pair is worth the same as 1 pip in every other pair. This is not true - it feels like they cost the same - but they are not worth the same.