**What are Pips?**

##### Pip is probably one of the most important terms to know when trading in the Forex market. It is simply impossible to fully grasp the meaning of a Forex position/trade without understanding the concept of a pip.

##### This influences your trading strategy, your calculations for ‘Take Profit’ and ‘Stop Loss’ (which are of great importance for money management of your portfolio) and other factors that require significant consideration such as limits and calculating the desired leverage.

Furthermore, the broker’s profit is calculated by the amount of pips between the buy and sell (Bid & Ask) rates, also known as the spread.

##### Percentage in Point / Price Interest Point, otherwise known as PIP, represents the smallest movement that a currency pair can make. Most currency pairs, **except for the JPY**, are priced to four decimal places, meaning that a pip is one unit of the fourth decimal point (0.0001).

##### * Some brokers also provide the 5th decimal point, the decimal fraction (0.00001, representing 10% of a pip).

As a member of Pips Bring Friends, Winpips offers you 10% of a pip.

**How to calculate the value of a Pip?**

##### As mentioned; pip is a unit representing the value of the movement of the underlying currency pair.

In **most** Forex trading platforms, the traded amount is measured in “Lots” where one lot equals 100,000 of the base currency, being the left currency of the pair.

On the other hand, while the lots are measured in the base currency, the pips are measured in the quote currency, being the right currency of the pair.

#### Lot size:

##### → 0.01 Lot = 1,000 (micro-lot)

##### → 0.1 Lot = 10,000 (mini-lot)

##### → 1 Lot = 100,000

##### → 10 Lots = 1,000,000

##### → 100 Lots = 10,000,000

#### Examples for Pips Calculations:

##### EUR/USD at an exchange rate of 1.1980. Let’s imagine that the rate goes up to 1.1990 (10 pips higher).

##### » Taken with 1 Lot: **100,000 (equals 1 lot) /10,000 (in order to get to pip size 0.0001) = $10.**

1 pip is worth $10, so 10 pips are worth $100.

1 pip is worth $10, so 10 pips are worth $100.