The most basic step in learning Forex trading is Pips and Pipettes. These two names will come up to you repeatedly when you start forex trading. We should have written an article in this regard long ago, but we forgot about this important issue. Newbies must have an idea about these Pips and Pipettes. So today, in this article we will discuss this briefly and trying to educate you regarding this topic.
What are Pip / Pips?
The most common price increment of currencies is known as the “pip.” Pips are a unit that measures the difference between the two currencies. Suppose the value of the EUR/USD currency pair changed from 1.1050 prices to 1.1051 prices. This means that the currency pair has increased .0001 USD, which means its value has increased by 1 pip.
Pip is the last decimal place of the quotation.
Most currency pairs are up to 5 digits after the decimal, but in some pairs, there are no digits after the decimal. For example, the currency of the Japanese Yen pair (this pair is after 2 digits).
What are Pipettes?
There are forex brokers that quote currency pairs beyond the standard “4 and 2” decimal places to “5 and 3” decimal places. These brokers quote as FRACTIONAL PIPS. This is called Pipettes
Have a look at this example, the value of the GBP / USD currency pair changed from 1.30542 prices to 1.30543 prices. This means that the currency pair has risen to .00001 USD, which means its value has increased by 1 Pipette (points).
It seems confusing? isn’t it? Let’s check the following Pips MAP…
Calculating Pips and Pipettes
As every currency has its own relative worth, it’s important to ascertain the estimation of a pip for that specific currency pair. In the following example, we will use a quote with 4 decimal places.
Example #1 EUR/USD = 1.1020
it means 1 EUR to 1.1020 USD (or 1EUR/1.1020USD)
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