HOW TO CALCULATE PIP VALUE WHERE THE SECOND CURRENCY IN THE CURRENCY PAIR MATCHES THE CURRENCY OF YOUR TRADING ACCOUNT
If your trading account is in US dollars and you are trading a currency pair in which the second currency is US dollars as well then the pip values below would apply based on the account type that you have.
If your account type is a standard lot account one pip would be US$10per pip
If your account type is a mini lot account one pip would be $US1 per pip
If your account type is a micro lot account one pip would be .10 cents per pip.
For ease of calculation we will assume that you have a mini lot accounts in which the value of one pip is USS1 per pip if the second currency in the currency pair is the same as the currency as your account.
Example 1
Let’s look at some examples using your USD mini lot account. What’s the pip value for GBP/USD, NZD/USD, EUR/USD. Your answer should be US$1 per pip as the second currency in the currency pairs matches that of your account (US dollar mini account).
Example 2
If you trading account is not in US Dollar, let say your trading account is in GBP. What would be the pip value for the following currency pair – EUR/GBP. The answer would be £1 per pip. Why? Because the second currency in the currency pair matches that of the mini lot account Great British Pound (GBP).
PIP VALUE WHERE THE FIRST CURRENCY IN THE CURRENCY PAIR MATCHES THE CURRENCY OF YOUR TRADING ACCOUNT
Example 3
We are still using our US$ mini account. What is the pip value for USD/JPY? In this example, the second currency in the pair is not USD but the first currency is, in this situation you will have to calculate the pip value by dividing the fixed pip value amount US$1 for mini lot USD account by the rate for the USD/JPY.
Pip value = US$1 (fixed price for mini lot account) / rate of the currency pair
If the currency pair includes the JPY then you will have to multiply your result by 100 to get your pip value.
Let’s assume that the rate of the USD/JPY is 109.05. The the pip value for the USD/JPY is using the formula above is-
Pip value = US$1 / 109.05 multiply by 100
Pip value = .92 cents per pip
Example 4
Let look at another example, what’s the pip value for USD/CAD? Note the second currency in the currency pair is not USD but the first currency is, therefore you will divide the fixed price of US$1 for mini lot by the rate for the USD/CAD which is 1.2846. Your answer would be .78cents per pip (US$1/1.2846) In this example you do not need to multiply by 100 as the currency pair does not consist of JPY.
PIP VALUE WHERE NEITHER THE FIRST NOR THE SECOND CURRENCY IN THE CURRENCY PAIR MATCHES THE CURRENCY OF YOUR TRADING ACCOUNT
Example 5
Let say, you have mini lot account is in Australian Dollar (AU$) and you would like to find the pip value for the GBP/USD?
Please note – none of the currencies in the currency pair matches the currency of the account you are using – Australian Dollar (AU$).
First convert the second currency in the currency pair (USD) to the currency of your mini lot account AUD.
In order to do this you will need to use the currency for the account as the first currency and maintain the USD as the second currency. You will now have a new currency pair that is AUD/USD.
Second, find the rate for your new currency pair (AUD/USD) Let’s assume the rate is .7500.
Finally, divide the fixed mini lot price AU$1 per pip by the new AUD/USD rate of .7500, therefore your answer would be AU$1.33 per pip (AU$1/.7500)
Example 6
Let’s look at another example using your Australian Dollar mini account. What is the pip value for the EUR/JPY?
Please note – none of the currencies in the currency pair does not match the currency of the account.
First convert the second currency in the currency pair (JPY) to the currency of your mini lot account AUD.
In order to do this you will need to used the currency for the account as the first currency and maintain the JPY as the second currency. You will now have a new currency pair that is AUD/JPY.
Second, find the rate for your new currency pair (AUD/JPY) Let’s assume the rate is 82.19.
Finally, divide the fixed mini lot price AU$1 per pip by the new AUD/JPY rate of .82.19, therefore your answer would be .0122 (1AU$/82.19). As this currency pair includes the JPY you will need to multiply your answer by 100 to get the pip value, Therefore the pip value is AU$ 1.22 per pip (.0122*100)
Now take the plunge and do some further examples on your own for practice!!!!!