Pips:
Pip is the short form of
Percentage in point. In Forex market a pip is the change of a unit of exchange
rate of a currency pair. Pips is the plural of pip. Many people call it point.
But pips is internationally known. People get this very difficult. But I think
that this example will clear everything. Let’s see what we can learn.
Example: You open your trading
terminal which is given by your broker. You can see that EUR/USD was 1.3140 and
now it is 1.3145. How many pips changed?
This is calculated like this:
More-Less = 1.3145-1.3140=0.0005
As pips is
calculated from the 4th digit after the decimal. So, the market has
changed 5 pips. Let’s forget the decimal and make it easy.
Calculate like this: 3145-3140=5.
This means that 5 pips
moved in the forex market.
Some market movements (EUR/USD):
- It was 1.3450 and now it is 1.3468. 1.3450-1.3468 = market moved 18 pips.
- It was 1.3320 and now it is 1.3296. 1.3320-1.3296 = market moved 24 pips.
- It was 1.2139 and now it is 1.2786. 1.2786-1.2139 = market moved 647 pips.
- It was 1.5450 and now it is 1.6450. 1.6450- 1.5450 = market moved 1000 pips.
- It was 1.1590 and now it is 1.1620. 1.1620- 1.1590 = market moved 30 pips.
Hope that you have understood everything about pips. It is
time to test yourself.
EUR/USD was 1.3650 and now it is
1.3510. The market changed how many pips? If you can give the
correct answer, you are approaching to the right path. You might have listened
that EUR/USD has increased 200 pips or 100 pips has
decreased in 5 minutes. The movement of Forex market is counted by pips.
So, a trader must have clear concept about pips.
Pipettes:
A few
brokers have 5 digits after the decimal. The 5th digit is called pipettes.
The way to calculate pipettes is same. A few examples are
available.
Like (EUR/USD):
1.
It was 1.3450 and now it is 1.3468.
1.3450-1.3468 = market moved 18 pipettes.
2.
It was 1.2139 and now it is 1.2786.
1.2786-1.2139 = market moved 647 pipettes.
Hope that you have got a clear idea about pips and pipettes.
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