ALB Limited 28.01.2022

What is a PIP in Forex ?

PIP ( Percentage in point ) is called the most basic unit of measurement used when trading foreign exchange. In other words, it is a unit of measure that expresses the change in value between two different currencies. A pip (percentage in point) usually refers to the last decimal place of a quote. In general, increases or decreases in foreign exchange prices occur with very small growth or reductions. To calculate the value of a PIP, you need to determine the currency pair you are planning to trade because the PIP varies according to the currency pair.

Nowadays the internet is used to invest and make a profit. For those who want to invest but do not know where to start, an important first step is to learn about this market and research its infrastructure. If you decide to invest or trade in the financial markets, some brokers can provide you financial services in order to help you with connecting to a market or stock market to execute your trades. Don’t forget to mention that in this investment process, you need to pay attention to the low transaction cost, the active availability of the system 24 hours a day, the dynamic, transparency and highly equipped liquidity of this market.

Most brokers today make web-based or desktop executable trading platforms out-of-the-box. Some of them even have mobile app usage. In short, if you are looking for an investment process with low transaction costs, transparency, 24-hour active availability, cash flow, and dynamism of the system, a Forex trading platform can be a good choice for you with its advanced infrastructure that is not affiliated with any broker. Hence, if you decide to trade in Forex, you need to know a PIP and its effects.


What Are The Effects Of a PIP In Forex ?


Since PIPs are used to calculate the rates that traders in the Forex market will pay, people choose by examining small increases or decreases. They calculate their profit or loss by considering this value. When investing in a currency, you first determine a currency for the account you need to open, and when determining this currency, you look at the PIP value, which affects the preferences of the investors.

How To Calculate a PIP ?


The Forex market is one of the most recent trends as a very low-cost investment tool compared to many other financial markets. Forex is the only investment market where you do not have to calculate with additional financial expenses such as account management price, brokerage fee, transaction commission. It is very easy and fast to use. The main point that is important for the Forex market is the spread rate that you should consider before investing.

The spread rate is the value that shows the difference between the buying and selling prices of the commodity or index to be traded while investing. This value can only be measured with the unit called a “PIP”. When calculating a PIP, it is necessary to look at the parities. Usually, pairs use 4 digits after the comma. A pip corresponds to 0.0001 on most pairs. So 1 pip is equal to 1/10,000. Sometimes there are 2 digits after the comma in some parities. In those parities, you need to calculate the quotation value over 0.01, and as a result, the precision will be 1/100.

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Tags: PIP, Percentage in point, Calculate a PIP

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