If you are a new Forex trader, then you must have heard the term “pips” and won’t have any idea about what it is. To understand your profit or loss in the foreign currency market, you need a good idea of pips. In this blog, we are going to learn what is a pip and also how a pip calculator tool like the one given above can be utilized to calculate profit or loss quickly and easily.
What Is a Pip in Forex?
A pip is an acronym for “percentage in point” or “price interest point.” It is the smallest price change a currency pair can have, traditionally in the market. A pip for the majority of currency pairs like EUR/USD is 0.0001.
For example:
If EUR/USD has gone from 1.1000 to 1.1001, it has gone 1 pip.
Pips are crucial for measuring changes in currency prices and calculating potential profits or losses in a trade.
How to Use the Pip Calculator Tool
The pip calculator program helps investors calculate the value of a pip in the currency they have chosen. This comes in handy during risk management and trade planning.
This is how you can use the pip calculator, as shown in the above tool:
Step 1: Enter the Number of Pips
- Put the number of pips you want to compute in.
- For example : Enter 1 pips
Step 2: Choose Your Instrument (Currency Pair)
- Select currency pair that you will trade from a list.
- For example: Choose EUR/USD
Step 3: Input the Lot Size (Trade Size)
- Here you enter how much you are sending.
- For instance, 0.01 lot is a micro lot (1,000 units).
Step 4: Select Your Deposit Currency
- Choose the currency of your account which is funded.
- For example : Choose US Dollar.
Step 5: Verify the Pip Size
- For EUR/USD, the pip is usually 0.0001. The software already puts this in for you.
Step 6: Click “Calculate”
- After you have input all the data, click on the Calculate button.
- It will display the 1 pip value of your trade. Here it is US$0.10.
Why Use a Pip Calculator?
Conserves time and avoids hand calculations. Assists you in risk planning more accurately. Perfect for beginners wishing to learn pip value by trade size. Final Thoughts Pip calculator is an intelligent method to make well-informed trading choices in Forex. It’s quick, easy, and provides you with a clear notion of your possible risk or gain. No matter if you trade micro, mini, or standard lots, this tool is at your command. Try it out before your next trade and be more confident with your numbers!