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Pip Value > Newbie question

  • #1
  • First Post: May 17, 2004 2:31am May 17, 2004 2:31am
I am currently trading with a mini account....

How come each pip for the EUR/USD is a dollar for each lot, while others like the USD/CHF it's less then a dollar per pip per lot? Is there a way to make it an even dollar, or is that just how it works?

Thanks again for your help and patience.
  • #2
  • May 17, 2004 3:57am May 17, 2004 3:57am
thats just how it works. check out this link, it lists the different pip values for the major currency pairs.

http://www.globalcurrencytrading.com/PIP%20Value.htm
Relax and be happy.
  • #3
  • May 17, 2004 1:16pm May 17, 2004 1:16pm
Thanks Merlin.
  • #4
  • Dec 14, 2005 5:02pm Dec 14, 2005 5:02pm
Quoting merlin
thats just how it works. check out this link, it lists the different pip values for the major currency pairs.

http://www.globalcurrencytrading.com/PIP%20Value.htm

Dialist,

Bad link here, as far as I can tell.

Great job here so far!! I for one really appreciate it.

Jimmy
  • #5
  • Dec 14, 2005 6:57pm Dec 14, 2005 6:57pm
Quoting dangerman
Dialist,

Bad link here, as far as I can tell.

Great job here so far!! I for one really appreciate it.

Jimmy
Thanks dangerman. Here's a link to a different pip calculator that is working. For "volume" enter your position size (1k, 10k etc.)

http://www.forextips.com/pipcal.htm
sxaxlxvxaxtxixoxnxbxyxgxrxaxcxexdxoxtxoxrxgx
  • #6
  • Dec 15, 2005 1:05am Dec 15, 2005 1:05am
Quoting JCesana3
I am currently trading with a mini account....

How come each pip for the EUR/USD is a dollar for each lot, while others like the USD/CHF it's less then a dollar per pip per lot? Is there a way to make it an even dollar, or is that just how it works?

Thanks again for your help and patience.
Hi JCesana3,

If the pair is in the format XXX/USD the price per pip will be fixed at:

Standard Lot ($100,000) = $10 per pip
Mini Lot ($10,000) = $1 per pip
Micro Lot ($1,000) = $0.10 per pip

If the pair is in the format USD/XXX then the price per pip will vary with the current price. Assume for this example that the current price is 123.00.

Standard Lot ($100,000) = 1000 / 123.00 = $8.13 per pip
Mini Lot ($10,000) = 100 / 123.00 = $0.81 per pip
Micro Lot ($1,000) = 10 / 123.00 = $0.08 per pip

If the pair does not include USD, like EUR/GBP for example, then the calculation is much more complex. I can't remember how to do it, so I can't tell you here. If I remember later on, I'll come back and edit this post to include the calculation.

Dial
sxaxlxvxaxtxixoxnxbxyxgxrxaxcxexdxoxtxoxrxgx
  • #7
  • Jan 9, 2006 9:05pm Jan 9, 2006 9:05pm
I get it dial.....but why?
  • #8
  • Jan 9, 2006 9:21pm Jan 9, 2006 9:21pm
Quoting GoatT
I get it dial.....but why?
Why what?
sxaxlxvxaxtxixoxnxbxyxgxrxaxcxexdxoxtxoxrxgx
  • #9
  • Jan 9, 2006 10:35pm Jan 9, 2006 10:35pm
Quoting JCesana3
I am currently trading with a mini account....

How come each pip for the EUR/USD is a dollar for each lot, while others like the USD/CHF it's less then a dollar per pip per lot? Is there a way to make it an even dollar, or is that just how it works?

Thanks again for your help and patience.
Yes, you can make it an even dollar for USD/CHF. You will need to trade what ever the rate is times 10,000. Unfortunately, most brokers have lots or mini-lots. The only broker that allows variable trade size to the unit level is Oanda.
  • #10
  • Jan 10, 2006 12:10am Jan 10, 2006 12:10am
It has to do with the way the currency is quoted. In EUR/USD, the price
(e.g. 1.20xx) is 1.20xx $ per EUR. Therefore your profit/loss is represented in USD (GBP/USD, AUD/USD are other examples).
In a currency such as USD/CHF, the price (1.27xx) is 1.27xx CHF per USD, so your profit/loss is in CHF, which must then be converted to USD (divide by the USD/CHF price) for you to get your pip value in USD.
When you have a cross (no USD component e.g. EUR/CHF) your profit/loss will be in CHF, which you convert in the same way as before.
Personally I get confused when people talk in $ pip values. So much easier to think of it in currency terms IMO.
  • #11
  • Jan 10, 2006 6:16pm Jan 10, 2006 6:16pm
Nevermind....clearly I shouldn't be allowed to post when I'm tired....sorry Dial ;-)
  • #12
  • Jan 11, 2006 2:35am Jan 11, 2006 2:35am
I use GCI as a broker. They tell me what the pip value is for a given pair. It is part of my tradeing platform. Maybe you could clear up some of the fog in your head by checking through your tradeing platform??
Just a thought.

But don't forget to understand why each pip has a given value.
  • #13
  • Nov 23, 2010 3:01pm Nov 23, 2010 3:01pm
In a trade history I have:

Time: 2010.11.23 10:00
Type: Sell
Size: 1.0
Symbol: EURGBP
Price: 0.85187
S/L: 0.85265
T/P: 0.85140
Time: 2010.11.23 10:14
Price: 0.85149
Swap: 0.00
Profit : 60.57

If I take my Position open price and minus my position close price (this is a sell) I get .00038 because this is a full position (1.0) I multiply this by 100000 and get 38 a quick check of my account and it is setup for 200:1 leverage. So I think this should be 78? How did the profit become 60.57?

Understanding this will help me greatly.
  • #14
  • Nov 9, 2011 2:07am Nov 9, 2011 2:07am
im always confused in calculating pips and im still confused.... can anyone make me clear in 1 kg gold lot size.. how to calculate pip????
  • #15
  • Nov 9, 2011 1:48pm Nov 9, 2011 1:48pm
Are Lot Units the base or quote currency?

Many trusted forums and forex education website definitions of lot units used in forex refer to the standard lot representing 100,000 units of the base currency. They contradict themselves though in their calculation examples, because the results show they must have calculated the lot units representing the quote currency.

Investopedia.com however defines lot units as the quote currency! So who is right?

There is a lot of confusion with newbies grasping what is going on with pips and lots in say position sizing calculations etc., when using various currencies and may be this is the source of it. Its hard to follow explanations when they initially say one thing and do another!

So what currency are lot units representing? Can an experienced and educated forex trader finally answer this question correctly please for every newbie out there (with preferably an authoritative reference).

I have searched high and low for an answer I can trust. And it really does make a difference when thinking through the resulting outcome currency of calculations.
  • #16
  • Edited 6:36pm Nov 9, 2011 6:07pm | Edited 6:36pm
Quoting pipsurfer
Are Lot Units the base or quote currency?

Many trusted forums and forex education website definitions of lot units used in forex refer to the standard lot representing 100,000 units of the base currency. They contradict themselves though in their calculation examples, because the results show they must have calculated the lot units representing the quote currency.

Investopedia.com however defines lot units as the quote currency! So who is right?

There is a lot of confusion with newbies grasping what is going...
when you go long you are swapping the base for the quote, then when you sell you are swapping the quote for the base.... so it's kind of moot since the whole process involves one then the other. the perspective you take is from the quote. you went long so you bought 1 lot of quote for base, or you went short and sold 1 lot of quote for base. just keep it simple in your head. when you go to unwind the position you are just swapping back however many you bought or sold to revert to however you started, except the rate will have changed and you will get back more or less of the base.

it depends how you look at it, but that's probably the simplest. the reason i say it 'depends' is because you can look at it as though with "n abc/xyz" you can say "n abc = 1 xyz" or you can say "1 xyz = n abc". from there you can mathematically spin it whichever way works for you depending on which way you want to convert it and so on. all you need to remember is that when you go long you are buying quote and selling base, then when you sell you are selling quote and buying base.

what i probably haven't been clear about, though, is that when i say you have bought 1 lot of quote this doesn't mean you have 100,000 of quote. it's like saying i spent $10 on a bag of apples, you don't have 10 apples. you spent $10 (base) and received however many apples that got you (quote).

say you go to the arcade and want to play some token spewing rewards game. you go to a machine or a clerk and swap your dollars for their funny money tokens (swapping your currency for their currency). then you use these tokens to play the games. if your performance goes well and you end up with more tokens than you started then when you go back to convert the tokens into money you will receive more money back, otherwise you will receive less money back.

arbitration is like putting into the machine a couple of tokens and winning a stuffed bear prize, taking that bear next door to the pawn shop, and selling it for more than it cost you when you work out however much money it cost you to purchase the tokens that you then spent on the machine which garnered you the toy.

but at the end of the day if you converted 1 dollar into 1.5 tokens and never did anything then when you go to leave you convert 1.5 tokens back to 1 dollar (as long as the arcade didn't change the token/dollar rate). at the start the rate was 1 dollar = 1.5 tokens, then at the end the rate was 1.5 tokens = 1 dollar.

people get confused when they don't have dollars or tokens to start with and don't understand how they can be involved in a process which uses dollars and tokens when they have neither. if they just came from europe and only had euros then first they would have to find someone to convert their euros to dollars, then they could convert their dollars to tokens.... then back from tokens to dollars, then from dollars to euros. transaction complete.
Congratulations ScalaFX for coming out of the closet!
  • #17
  • Nov 9, 2011 7:46pm Nov 9, 2011 7:46pm
as for why pip values change, as per the theme of the thread, i haven't really seen a clear explanation so far. so, i'll refer to something i previously said elsewhere.

Quoting nubcake
as for why your amount/point drastically changing i can only assume you went from trading one currency pair to a different pair. the amount that a change of 1 point means on one currency pair is different to another (unless the prices are identical). a pair priced at $1.5000 will have a $/point value different to a pair priced at $0.8000.

think about it this way. the percentage of change between 1 and 2 is a 100% increase. the percentage of change between 100 and 101 is only a 1% change. they both stepped-up by the same amount, but the...
no one is converting $1 for some other currency. they are converting bundles of dollars for some other currency.

if you exchange $1 for an apple, then apples increase in value to $2 and you sell the apple you get back $2. a profit of $1. but no one is buying 1 apple at a time, they are buying hundreds, thousands, hundred-thousands at a time.

so, if you had bought $100 worth of apples at $1 each you would have 100 apples. if you then sold them for $2 each you would receive back $200 and so make $100 profit on your original $100.

similarly, if the price of apples was $10 and you bought $100 worth of apples you would have 10 apples. if you then sold them for $11 each you would receive back $110 and so make $10 profit on your original $100.

in both cases the price of apples only changed by $1. what makes all the difference is how many you can buy with the money you have. as per the previous post when you make a 1 lot trade you are exchanging 100,000 of base currency for the quote currency (either buying it or selling it). this lot value is standard. 1 lot always equals 100,000 base. however, what you receive in exchange for that 100,000 base differs depending on the current exchange rate.

in the previous examples with apples $100 bought you 100 apples in one case, but only 10 apples in another case. the apple/dollar rate was different in the 2 examples and so your $100 bought different amounts in the different cases. despite the value of apples only then increasing by $1 in each example you would have made differing amounts of profit because you were holding differing amounts of apples, so you received differing amounts of profit per $1 increase (or decrease) in the apple/dollar exchange rate.

it comes down to granularity and rate of change. if you jump from a eurusd trade to a usdjpy trade you will get a rude shock when your equity value changes drastically different per tick. usdjpy ticks up and down by 0.01 and also starts at a rate wildly different to eurusd which ticks up and down by 0.0001 (not considering pipettes).

ima shut up now.
Congratulations ScalaFX for coming out of the closet!
  • #18
  • Nov 9, 2011 9:01pm Nov 9, 2011 9:01pm
Quoting pipsurfer
Are Lot Units the base or quote currency?

Many trusted forums and forex education website definitions of lot units used in forex refer to the standard lot representing 100,000 units of the base currency. They contradict themselves though in their calculation examples, because the results show they must have calculated the lot units representing the quote currency.

Investopedia.com however defines lot units as the quote currency! So who is right?

There is a lot of confusion with newbies grasping what is going...
I'm not 100% sure as to what you are asking but I think it's in relation to the "value of a pip" in various pairs.

If this was truly what you wanted to know then the following info may help you... if not rephrase your question.

[NOTE: most brokers now use a fifth or third decimal (depending on the pair in question) placement for fractional pip movements... the movements described below are for full pip movements NOT fractional.]

How to Calculate Pip Values

A "pip" is the smallest increment in any currency pair. In EURUSD, a movement from .8941 to .8942 is one pip, so a pip is .0001. In USDJPY, a movement from 130.45 to 130.46 is one pip, so a pip is .01. How much in dollars is this movement worth, for example, per 10,000 Euros in EURUSD? How much is one pip worth per 10,000 Dollars in USDJPY? We will refer to the size, in this case 10,000 units of the base currency, as the "Notional Amount". The formula for calculating a pip value is therefore:

(one pip, with proper decimal placement/currency exchange rate) x (Notional Amount)


Using USDJPY as an example, this yields:
(.01/130.46) x USD10,000 = $0.77
or 77 cents per pip

Using EURUSD as an example, we have:
(.0001/.8942) x EUR10,000 = EUR 1.1183
But we want the pip value in USD, so we then must multiply EUR1.1183 x (EURUSD exchange rate):
EUR 1.1183 x .8942 = $1.00

This is in fact a phenomenon you will see with any currency in which the currency is quoted first (such as EURUSD, GBPUSD, or AUDUSD): the pip value is always $1.00 per 10,000 currency units. This is why pip (or "tick") values in currency futures, where the currency is quoted first, are always fixed.
Approximate pip values for the major currencies are as follows, per 10,000 units of the base currency:

USD/JPY: 1 pip = $.77; In other words a change from 130.45 to 130.46 is worth about $.77 per $10,000.
EUR/USD: 1 pip = $1.00; .8941 to .8942 is worth $1.00 per 10,000 Euros.
GBP/USD: 1 pip = $1.00; 1.4765 to 1.4766 is worth $1.00 per 10,000 Pounds. USD/CHF: 1 pip = $.59; 1.6855 to 1.6866 is worth $.59 per $10,000.

LINK
  • #19
  • Nov 10, 2011 12:56pm Nov 10, 2011 12:56pm
Quoting nubcake
when you go long you are swapping the base for the quote, then when you sell you are swapping the quote for the base.... so it's kind of moot since the whole process involves one then the other. the perspective you take is from the quote.
Thanks for your input, I will chew more on this.

I don't think I worded my question very well, but I guess what I am getting at is what is the resultant value per pip currency after calculating the lot size? Most example calculations show the value per pip e.g. for a standard lot to be $10 USD but can that be EUR or GBP etc depending on the currency pairs? Or is it always calculated to reflect the value per pip in USD? What if my broker account is held in GBP etc?

Thanks in advance to all contributors
  • #20
  • Edited Nov 11, 2011 1:06am Nov 10, 2011 6:32pm | Edited Nov 11, 2011 1:06am
Quoting nubcake
when you go long you are swapping the base for the quote, then when you sell you are swapping the quote for the base....
firstly, every 6 months to a year i have to re-educate myself as to how to read the damn exchange rate quotes. for whatever reason i start considering the quotes to be like "1.5 eur/usd" meaning 1.5 euro's per dollar. but what it should be is "eur/usd 1.5" meaning 1 euro equals 1.5 dollars. i start regarding quotes in a mathematical sense and expect the layout to read like a math problem, when in fact it's not even anything like that and my perspective is completely broken and backwards....

so with that said i have just re-educated myself at http://www.babypips.com/school/how-y...-in-forex.html

i feel dirty for having to read babypips, but it is what it is and i was due for a complete stuff-up requiring correction soon anyway. so it's done.

now what i said in a previous post about going long was incorrect. you are buying the base. then when you go short, or sell, you are selling the base (left-hand side of the quotes). therefore it is important to realize that my previous post was quite inside out and not worth the paper it's not even written on.
Congratulations ScalaFX for coming out of the closet!
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