A Pip is the acronym for “Percentage in Point”. A pip was typically defined as the smallest price change that a currency can move, however recent pricing developments have extended the granularity another decimal place further to the right so traders can see fractions of pips now – also called “pipettes”. For example if you saw a EUR/USD quote of 1.1750,a price change to 1.1751 would equal 1 pip. Now that same quote shown using pipettes or fractions of pips would be; 1.17500 with a price changes to 1.17512 which Would equal 1.2 pips. The easiest way to determine if your broker is showing standard pips or fractional pips is to look at the Euro and see how many decimal places are shown to the right of the decimal point.
Pip Values Since traders deposit their funds in a number of different currencies globally the value
Of a pip (which would link directly to your profit or loss) may need to be converted back To whatever you have your account denominated in. Pip values are determined by the QUOTE currency in any cross.
Example: if you have a US Dollar account and are trading 1 standard lot of The USD/JPY each pip is now denominated in Yen (JPY) so you would want To convert it back into USD. To do this divide the appropriate pip value by the current exchange rate ratio in terms of the base currency and multiply that by your trade (or lot) size.
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