In forex trading you will often hear about so-called PIPS or just PIP. What’s going on here?
Don’t start to trade forex, unless you fully understand the meaning of this important term!
The definition of Pip in forex
The definition says that pip (“pips”) are the points or units that represent the smallest increment in the price of currency exchange rate. Also included in the pairs is a commission for a broker called ” spread.
An example of a pip
Let’s take major currency pair EURUSD … a change from the EURUSD from 1.3201 to 1.3203 is then an increase of 2 pips (points).
IMPORTANT TO KNOW:
PIP is a very important term in forex trading!
PIP is used to calculate profit/loss by measuring price points. Performance (profitability) of all forex trading strategies and EA’s (expert Advisor) is based on PIPs. Also when forex traders talk about their trading strategies, they always talk how many pips of profit/loss they made on each trade.
The value of a PIP in forex
The value of a PIP depends on the position size. This is usually measured in LOTs and their size.Please read this article where you learn more about LOT in forex trading.