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How to Calculate Pips on Forex

Damaris Gatwiri
How to Calculate Pips on Forex

Pips are one of the most important measurements in forex trading because they indicate how much a currency pair has moved in value. A pip, which stands for “percentage in point,” is typically the fourth decimal place for most currency pairs and the second decimal place for currency pairs involving the Japanese yen (JPY). Knowing how to calculate pips helps traders measure profits, losses, and price movements accurately before entering or exiting trades.

  1. Understand What a Pip Is

A pip is the standard unit used to measure price changes in the forex market.

For most currency pairs, one pip equals 0.0001, while for JPY pairs, one pip equals 0.01.

  1. Identify the Opening and Closing Prices

Determine the price at which you entered the trade and the price at which you exited.

The difference between these two prices is used to calculate the number of pips gained or lost.

  1. Calculate the Price Difference

Subtract the opening price from the closing price.

For example, if you bought EUR/USD at 1.1050 and sold it at 1.1085, then:

Price Difference = 1.1085 − 1.1050 = 0.0035

  1. Apply the Pip Formula

To calculate the number of pips for most currency pairs, use the following formula:

Pips = (Closing Price − Opening Price) ÷ 0.0001

Using the previous example:

Pips = 0.0035 ÷ 0.0001

Pips = 35

For JPY currency pairs, divide the price difference by 0.01 instead.

  1. Determine Your Profit or Loss

After calculating the number of pips, multiply it by the pip value of your trade size to determine your monetary profit or loss.

The pip value depends on the currency pair traded and the lot size used, such as a standard lot, mini lot, or micro lot.

Also Read: How to Buy Airtime with a Mr Price Account

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