Using a Pip Calculator in Forex Trading

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Stephanie Giscka

Investment

Using a Pip Calculator in Forex Trading

Among other types of tools, Forex traders can find pips calculators to be very useful, when trading currencies. These calculators are actually very simple, but they are great for all kinds of traders and can allow you to become more organized and aware of what you are doing in the Forex market.

A pip, also known as a point, is simply the smallest incremental change that a particular currency pair can make. It ultimately depends on the context, however in general, 1 pip = 1 basis point. So in the case of EUR/USD, GBP/USD and USD/CHF for example, one single pip would be equal to 0.0001 and in the case of the USD/JPY currency pair, one single pip would be equal to 0.01.

Pips have different values across different currency pairs and across different prices. However, they will also be greatly affected by the contract size (in other words the size of the lot) being traded. Generally, besides standard lots, there are mini and micro lots. A standard lot = $100,000, a mini lot = $10,000 and a micro lot = $1,000. There are actually nano lots and such available, but these are much rarer and not all Forex brokers can provide these. A very small majority of currency traders actually trade nano lots anyway and even for a beginner, nano lots aren’t necessary. However just bear in mind that the size of the lot that you are trading will affect the pip size; the larger the contract size, the larger the pip size will be in a trade.

As already mentioned, the value of a pip will change as the price of the currency pair being traded fluctuates. Pip calculators allow traders and investors in the currency market to calculate the values of pips with great speed, ease and convenience; with a few clicks and a push of a button you can calculate pip sizes for different trades.

Pip calculators aren’t completely necessary, but they are definitely recommended. It doesn’t really matter what kind of Forex trading strategy you use; these types of calculators can really increase your awareness in the FX market and allow you to find out exactly how much of a profit or loss you could potentially see. There are many of these sorts of calculators on the internet for free too, so you may as well take advantage of them and use one.

In conclusion, pip calculators in Forex trading can prove to be useful among all kinds of traders and investors, regardless of their trading strategies. These types of calculators allow you to calculate the sizes of pips in each of your trades with very little hassle. This kind of calculator is free and really quite simple, but it is a great tool to use. These sorts of calculators will allow you to calculate how much of a profit or loss you could potentially make with a particular order, before placing it in FX market. By calculating the size of the pips when trading a particular currency pair, you will be more aware of your situation and you could potentially make more profits consequently. If you are serious about your Forex trading career and trading currencies, you should definitely consider implementing a pip calculator into your trading.

See Also:  The Difference Between Binary Options and Forex Trading

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