What is a PIP?

PIP stands for Price Interest Point.Currencies are traded on a price interest point (pip)system, and each currency pair has its own pip value.The PIP is the last decimal place of a quotation.The PIP will allow you to calcuate your PROFITS and LOSSES.
Because each currency has its own value, we must calculatethe value of a PIP for each currency.

Let's take 2 examples:
Note: You will not need to calculate, because your broker will do it for you.
I am just showing you how the PIP is calculate for your personal knowledge.

A) When the USD is the base:

ex: USD/JPY 119.80 ==> 1 PIP = .01

==> USD/JPY 119.80

-----> .01/119.80 = PIP value = 0,0000834


==> USD/CHF 1.5250

-----> .0001/1.5250 = 0.0000655

B) IF the USD is note the base, we must add one step:

ex: EUR/USD 1.2200

==> .0001 / Exchange rate = PIP value

-----> 0.0001 / 1.2200 = EUR 0.0008196

BUT WE NEED TO GET BACK TO USD, SO WE ADD ONE STEP:

==> 0.0008196 * 1.2200 = 0.00009999 (when rounded up: 0.00001)


Do not let this scare you, you will not need to calculate the PIP,
because your broker will do that automatically for you.