A Guide to Pips in the Forex Market

The first step to understanding the Forex market is to simply understand the lingo used by traders and brokers. One of the most commonly used terms by traders and brokers alike is known as a ‘pip’. Often, you will hear that a certain trade lost ten pips or gained a certain number of pips. Once you understand pips in Forex currencies, then you will have a better grasp of navigating the market.

  Pips in Forex currencies are measurements of the change in value of the currency. All currencies measure pips with four decimal places, except one major currency. The Japanese Yen is  the exception to the rule and measures pips with two decimal places. Once you as a trader have made a decision regarding what currencies you want to deal in, whether you prefer the regular Forex currency pairs or perhaps want to dabble in the Forex cross-currency pairs. Next, you will have to know how to read the cur
rency pair data.

When pips in Forex currencies reflect a change then that means a currency value has either dropped or risen relative to the other currency. In other words, you must measure the change based on the number of decimal places and for most currencies one pip is equivalent to .0001 or 1/10,000 of the currency unit. As mentioned before, th
e Japanese Yen operates on a different pip system and one pip in the Japanese Yenis .01 or 1/100 of the currency unit. So depending on the type of currency, the quotation rate of the foreign currency will be calculated with different pips systems. Pips in Forex currencies are fairly easy to understand once the system is thoroughly explained.

Another way to explain the system of pips in Forex currencies is that every change in pips represents a change in points or currency changes. Of course, as traders in the market we strive for a positive change of pips in Forex currencies. A valuable tool in order to determine the value of a pip for any given currency is that of an online pip value calculator. Internet users simply have to plug in their account currency, currency pair, and number of units in order to receive the price of a single pip. Using the right tools can help any level trader to navigate the world of pips in Forex currencies.


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