Forex trading is not child’s play. If you want to become a trader in the forex market, then you must know all the necessary things about forex. At the same time, Pip is also a very important thing that you must consider. Pip will help you to calculate and manage your trades. So, if you don’t know about pips, then read this article where I will tell you details that you need to know about pips.
Why Is a Pip Important?
Pip is a very important thing to consider if you are going to trade in the forex market. That is because Pip, or should I say the Percentage in point, is the difference value of the currency pairs. Now, that is the amount that the trader has to pay the market for the currency pair. However, the value depends on the total volume that you are getting. The Pip value is determined by the currency that is used by the trader to open the account.
What Does 1000 Pip Means?
The meaning of Pip can vary for different currencies. Now, the basic meaning for Pip is the small difference in the prices of the currency pair that are shown in the quoted value. Let me give you an example; suppose you are trading with EUR/USD, and the quoted value is 1.14998/1.14988. So, the Pip here is 0.0001, which would be considered one Pip. Now, the pips are so tiny in value that traders always trade in micro-lots (1,000), mini lots (10,000), and lots (100,000) currency units.
How Many Pips Is a Good Profit?
The answer is that 7 to 10 pips are good or should I say excellent for profit. But you must monitor and manually find the pips for yourself that will lead you to success. That is because if you rely too much on the system, then it won’t do anything good to you. However, you should learn to calculate the pips for yourself. You can take 0.0001, that is, consider one Pip and calculate your profit.
How to Calculate Profit from Pips?
It is a very simple calculation, actually. Now, you just have to multiply the number of pips that you have gained by each pip value. This way, you will be able to calculate how you have profited from the Pip. However, the base that is considered one Pip is 0.0001, which you must remember.
How to Calculate Pip Size for a Lot?
Pip’s size determination is also very important for a trader. Now, the calculation of the Pip size is quite simple. You just have to divide the one pip, which is 0.0001, usually by the present market value of the currency pair. Then you have to multiply that number with your lot size, and you will get the pip size on your hand. But you must manually calculate pips and all the things, and don’t rely too much on the system for your own good.
I hope now you know why Pip is important for forex traders and why traders should consider pips for trading.