• ABOUT US
  • Forex Store
  • Privacy Policy
  • Terms Of Use
  • Sitemap
  • Contact Us
  • Twitter
  • Facebook
  • RSS Feed
Best Forex Robots | FX Expert Advisors | Forex EA's
  • Top 25 Ranking
  • Best Forex Brokers
  • Forex Broker Rebates
  • Best Forex VPS
  • Forex Basics
    • What Is Forex Trading?
    • Who Trades Forex
    • Forex Trading For Beginners
    • How to Start Forex Trading
    • Market Hours
    • Currency Pairs
    • Currency Pair Correlations
    • Chart Types
    • Pips and Profits
    • Trade Order Types
    • Leverage, Lots and Margin
    • Transaction Costs
    • Best Hours, Days, Months to Trade
    • Overnight Interest, Rollover, or Swap Rate
    • Reflections of a Trader in the World of Options
    • Reflections of a Trader in the World of Commodities
    • FX Advantages Over Stocks and Futures
FOREX NEWS
  • [ January 31, 2023 ] Happy News EA Review Happy News EA
  • [ January 29, 2023 ] Forex Flex EA Review Forex Flex EA
  • [ January 28, 2023 ] FXCharger EA Review FXCharger EA
  • [ January 27, 2023 ] FX Eternals EA Review FX Eternals EA
  • [ January 26, 2023 ] FXCipher EA Review FXCipher EA
  • [ January 25, 2023 ] Happy Breakout EA Review Happy Breakout EA
  • [ January 24, 2023 ] Trade Explorer EA Review Trade Explorer EA
  • [ January 23, 2023 ] Happy Gold EA Review Happy Gold EA
  • [ January 22, 2023 ] FXGoodWay EA Review FXGoodWay EA
  • [ January 21, 2023 ] FXTrackPRO EA Review FXTrackPRO EA
HomeForex BasicsPips and Profits

Pips and Profits

Best Forex Robots Forex Basics Comments Off on Pips and Profits

Welcome To This Testing Website With Reviews And Real Trading Results

Top 25 Ranking Of The Best Forex Robots | FX Expert Advisors | Forex EA’s In 2023

Top 25 Ranking Of The Best Forex Robots 2023

Top 25 Ranking Of The Best Forex Robots For 2023
As the foreign exchange market continues to evolve, traders are seeking new and innovative ways to improve their strategies and gain a competitive edge. Forex robots, also known as expert advisors (…

BEST FOREX ROBOTS | FX EXPERT ADVISORS | FOREX EA’S - BESTFOREXROBOTS.COM

Happy News EA Review

Happy News EA
Price: €349.30 (Discounted Price for Happy News EA with 2 LICENSES, FREE UPDATES & SUPPORT)
Currency pairs: EURUSD, GBPUSD, AUDUSD and USDJPY
Timeframe: M15

Note: STRICTLY LIMITED DISCOUNT – 30% OFF

There are 2 differe…

Happy News EA Review

Forex Flex EA Review

Forex Flex EA
Price: $349.47 (Discounted Price for Forex Flex EA, 1 LIVE Account License for Metatrader 4 (MT4), UNLIMITED DEMO ACCOUNTS, FREE UPDATES & 24/7 FRIENDLY SUPPORT)
Currency pairs: Any (GBPUSD, EURUSD, USDJPY, USDCAD, USDCHF, AUDUS…

Forex Flex EA Review

FXCharger EA Review

FXCharger EA
Price: $385 (FXCharger MAX Package with 1 LICENCE, FREE SUPPORT & UPDATES)
Currency pairs: USDCAD, EURUSD, EURGBP, AUDUSD and USDJPY
Timeframe: H1

Note: There are 2 different packages of FXCharger Robot available right now…

FXCharger EA Review

FX Eternals EA Review

FX Eternals EA
Price: €149 (STANDARD Package with 3 REAL & UNLIMITED DEMO ACCOUNTS, FREE UPDATES & SUPPORT)
Currency pairs: USDCAD
Timeframe: H4

Note: There are 3 different packages of FX Eternals Robot available right now:

– ST…

FX Eternals EA Review

FXCipher EA Review

FXCipher EA
Price: $295 (FXCipher EA with 1 LICENCE, FREE UPDATES & SUPPORT)
Currency pairs: AUDUSD, USDCAD, EURJPY, NZDUSD and EURCAD
Timeframe: Any

Note: FXCipher is fully automated Forex software, that will do all the hard trading w…

FXCipher EA Review

Happy Breakout EA Review

Happy Breakout EA
Price: €550 (1 LICENSE FOR AN UNLIMITED NUMBER OF REAL & DEMO ACCOUNTS, FREE UPDATES & SUPPORT)
Currency pairs: EURUSD, GBPUSD
Timeframe: M30, H1

Note: With your purchase you’ll get the FULL PACKAGE of 10 Happy Fo…

Happy Breakout EA Review

Trade Explorer EA Review

Trade Explorer EA
Price: $397 (TRADE EXPLORER EA ONE YEAR MEMBERSHIP, 1 LICENCE, FREE UPDATES & FRIENDLY SUPPORT)
Currency pairs: 27 pairs (AUDCAD, AUDCHF, AUDJPY, AUDNZD, AUDUSD, CADCHF, CADJPY, CHFJPY, EURAUD, EURCAD, EURCHF, EURGBP, EURJPY…

Trade Explorer EA Review

Happy Gold EA Review

Happy Gold EA
Price: €349.30 (Discounted Price for Happy Gold EA with 2 LICENSES, FREE UPDATES & SUPPORT)
Currency pairs: XAUUSD (Gold)
Timeframe: M30

Note: STRICTLY LIMITED DISCOUNT – 30% OFF

There are 2 different packages of Happy…

Happy Gold EA Review

FXGoodWay EA Review

FXGoodWay EA
Price: $315 (FXGoodWay EURUSD with 1 LICENCE, 2 MODES, FREE UPDATES & SUPPORT)
Currency pairs: EURUSD, USDCHF
Timeframe: Any

Note: There are 2 different packages of the FXGoodWay Robot available right now:

– FXGoodWay U…

FXGoodWay EA Review

FXTrackPRO EA Review

FXTrackPRO EA
Price: $445 (FXTrackPRO SUPER with 1 LICENCE, FREE UPDATES & SUPPORT)
Currency pairs: EURUSD, GBPUSD, USDJPY, USDCAD, EURJPY and CHFJPY
Timeframe: Any

Note: There are 2 different packages of the FXTrackPRO Robot available…

FXTrackPRO EA Review

Waka Waka EA Review

Waka Waka EA
Price: $1,800 (WAKA WAKA EA with Up To 10 ACCOUNTS/ACTIVATIONS, FREE UPDATES & SUPPORT)
Currency pairs: AUDCAD, AUDNZD and NZDCAD
Timeframe: M15

Note: LIMITED TIME OFFER – 10% OFF – REGULAR PRICE: $2,000

MAKE MONEY WITH…

Waka Waka EA Review

Best Forex Brokers 2023

The Ultimate Guide To Choosing The Best Forex Brokers In 2023
Forex trading has become a popular investment opportunity for many individuals and institutions, making the market highly competitive. With the vast number of Forex brokers available, i…

BEST FOREX ROBOTS | FX EXPERT ADVISORS | FOREX EA’S - BESTFOREXROBOTS.COM

Best Forex VPS 2023


Note: ForexVPS.net – 15% OFF on all Forex VPS plans – Use the following COUPON CODES:

– BASIC PLAN: 15STARTBASICUSD
– BASIC+ PLAN: 15STARTBASICPLUSUSD
– STANDARD PLAN: 15STARTSTANDARDUSD
– HIGH FREQ PLAN: 15STARTHIGHFREQUSD
The Ultimate Gui…

Best Forex VPS

Get More Information And Read The Following Product Review!

The Pips and Profits of Forex Trading

Contents

The Pips and Profits of Forex Trading

What Is A Pip?

When you are into weightlifting, the common lingo of performance is pounds:
“I bench pressed 150 pounds today.”

When you are into forex, the common lingo of performance is pips:
“I made 150 pips profit on my last trade” or “My trade was stopped out today and I lost 85 pips.”

Ok, so what is a pip?

Pip is short for “percentage in point” or “price interest point,” and it is the smallest incremental price move that a currency pair can make. It’s the last decimal point in exchange rates or currency pairs. Depending on context, this is normally one basis point 0.0001 in the case of EUR/USD, GBD/USD, USD/CHF and .01 in the case of USD/JPY.

It is easy to see with examples.

Here is a 4-digit broker example:

marketwatch_4digit

Note: With 4 digit brokers, this last decimal point is 0.0001 for most currency pairs, and 0.01 for Yen based currency pairs. The spread is 2 pips (1.3504-1.3502=2) on this Admiral Markets demo. If the EUR/USD moves from 1.3502 to 1.3503, it would have moved ONE PIP.

Trade Sample On EUR/USD:

Entry Long EUR/USD at 1.3505
Exit Close EUR/USD at 1.3525
Profit/Loss +20 Pips

If you buy EUR/USD at 1.3505 and sell at 1.3525, you would have made 20 pips.

Trade Sample On USD/JPY:

Entry Short USD/JPY at 88.95
Exit Close USD/JPY at 89.25
Profit/Loss -30 Pips

If you sold USD/JPY at 88.95 and exited at 89.25, you would have lost -30 pips.

Here is a 5-digit broker example:

marketwatch_5digit

With 5 digit brokers (also called fractional pricing brokers), the last decimal point is 0.00001, or 0.001 for Yen based currencies, and it represents a fraction of a pip. For example, the spread on the EUR/USD is 0.9 pips (1.34995-1.34986) on this Alpari UK demo. If the EUR/USD moves from 1.34986 to 1.34996, it would have moved 1 pip.

Trade Sample On GBP/USD:

Entry Long GBP/USD at 1.55508
Exit Close GBP/USD at 1.56791
Profit/Loss +128.30 Pips

If you bought the GBP/USD at 1.55508 and sold it at 1.56791, you would have made 128.30 pips (1.56791-1.55508=128.30).

Because of the extra digit, it is harder to eyeball an exact pip spread or pip profit without the aid of a calculator. But this eyeballing problem of 5-digit brokers is outweighed by the larger advantage of typically better spreads, i.e., lower transaction costs, compared to their 4 digit broker counterparts.

The reason pips are so important is because they are the basis for calculating the dollar profit or loss in forex trading, as we shall see in the calculation of pip value (automatic and manual).

What Is The Difference Between A Pip And Tick Size And Tick?

In Forex, the tick size and pip are almost synonymous. As we have seen, pip is the smallest incremental price move of a currency. Tick size is the smallest possible change in price – very similar. Just like futures, the minimum possible amount that a price can move is also the market’s tick size. With 4 digit brokers, the EUR/USD has a tick size of 0.0001, which means that the smallest increment that the price can move from 1.3840 would be up to 1.3841 or down to 1.3839. The EUR futures market also has a tick size of 0.0001, but the difference is that the tick size of one contract has a fixed tick value of $12.50, meaning that for every 0.0001 that the price moves up or down, the profit or loss of the trade would increase or decrease by $12.50. In contrast, the tick size (pip or fraction of pip) of forex pairs is not fixed to a dollar value, and is instead calculated relative to the units traded (for Direct Rates), and also to the exchange rate and base currency quote (for Indirect Rates and Cross Rates).

How To Calculate Pip Value And Profit/Loss Manually

Bear in mind that the calculation of the dollar pip value is done by the broker automatically. However, for a number of reasons, it is useful to know how to do it on your own.

The calculation of profit/loss is different depending on the currency rate types, and there are three of them:

Rate Types Currency Pairs
Direct Rates EUR/USD, GBP/USD, AUD/USD, NZD/USD
Indirect Rates USD/JPY, USD/CHF, USD/CAD
Cross Rates EUR/JPY, GBP/JPY, AUD/JPY, EUR/CHF, EUR/GBP

There is a way to calculate the pip value of each pair and multiply it with the pip movement to derive the profit and loss in dollars.

If you don’t want to do pip value calculations, you can always use a handy indicator that displays the pip value (along with bid, spread, buy/sell swap rate) of a multiplicity of pairs.

This indicator will display the following info, for all currency pairs offered by your broker:

  • Symbol (A=AUD, C=CAD, E=EUR, F=CHF, G=GBP, J=JPY, N=NZD, U=USD)
  • Current bid price
  • Daily range to date:ave daily range (DR as a % of ADR)
  • Spread (spread as a % of ADR)
  • Dollars per pip (per full lot traded)
  • Swap paid(+) or charged(-) by broker on long and short positions

A picture of both this handy indicator applied to the AUDUSD chart of FXPro looks like this:

AU_DisplayInfoAllPairs1

The dollar per pip value appears as third from last column. UJ or USDJPY has a pip value of 12.44 (one of the bigger ones), and AN or AUDNZD has a pip value of 7.65 (one of the smaller ones). Notice that the AUDNZD spread is one of the largest at 20 pips (4th from last column), which is a whopping 28.9% of average daily range: as soon you go long on this pair with a 100K lot, you would be down -$153 (20 pips X 7.65). Not good. Thankfully, most pairs have a spread less than 5 pips and a pip value close to 10. Going long EU or EURUSD would incur a spread cost of only 1.8 pips (2.8% of ADR) and at a pip value of $10, you would be only down $18 on a 100K lot. This is a sizable difference from the cost of trading AUDNZD.

Below are ways to calculate pip values and pip movements through various calculations.

Direct Rates

Direct rates are currency pairs where the USD is the quote currency (the second currency being quoted i.e. XXX/USD). The common base currency (first currency quoted) pairings include EUR, GBP, AUD, and NZD.

Below is a table illustrating how to derive the Pip Value, Profit / Loss (P/L) in Pips, and the P/L in $USD

Rate Types Formula Example: EUR/USD 200,000 contract
buy at 1.4204 and sold at 1.4378
Pip Value lot size * tick size 200,000 (lot size) * 0.0001 (tick size) = $20.00
P/L in Pips Selling Price – Purchase Price 1.4378 (selling price) – 1.4204 (purchase price) = .0174 positive pip difference = 174 pips profit
P/L in $USD Pip Profit (loss) * Pip Value 174 (pip profit) * $20 (pip value) = $3480 USD

 

Note on Direct Rates:

Direct rates provide the easiest formula for calculating the pip value (lot size * tick size). Because the pip value does not divide with the current rate, as in the two rate formulas below, it remains the same value between the direct rate pairs and each pair’s price fluctuations. You can always remember that the pip value of a micro lot (1000 units) is $0.1 (10 cents), that the pip value of a mini lot (10,000 units) is $1, and that the pip value of a standard lot (100,000 units) is $10.

Indirect Rates

Indirect rates are those currencies traded indirectly against the U.S. Dollar (USD). For example, with USD/CAD, the USD is the “base currency,” the CAD is the “quote currency” and the rate quote is expressed as units per USD. USD/CAD trading at 0.9874 means that 1 USD = 0.9874.

Rate Types Formula Example: USD / JPY 100,000 contract
sell at 82.12 and buy at 81.34
Pip Value lot size * tick size / current rate 100,000 (lot size) * 0.01 (tick size)  / 82.12 (current rate) = $12.17
P/L in Pips Selling Price – Purchase Price 82.12 (selling price) – 81.34 (purchase price) = .78 positive pip difference = 78 pips
P/L in $USD Pip Profit (loss) * Pip Value 78 (pip profit) * $12.17 (pip value) = $949 USD

 

Note on Indirect Rates:

The only difference in pip value calculation between indirect rates and direct rates is the division with the current rate (lot size * tick size / currency rate). This division takes away from the more fixed rate of the direct rates. It makes all the pip values between the indirect rate pairs differ, and all the pip values will dynamically change relative to the current rate that changes constantly.

Cross Rates

Cross Rates are currency pairs that do not involve the USD. Interestingly enough, though the USD is not represented in the quote, it is used in the quote calculation. An example of a cross rate is the EUR/CHF, where EUR is the base currency and CHF is the quote currency.

Rate Types Formula Example: EUR/CHF 100,000 contract
buy at  1.1500 and sell at 1.1620
(with EUR/USD at 1.3890)
Pip Value lot size * tick size * base quote / current rate 100,000 (lot size) * 0.0001 (tick size)  * 1.3890 (EUR/USD base quote) / 1.1500 (current rate) = $12.07
P/L in Pips Selling Price – Purchase Price 1.1620 (selling price) – 1.1500 (purchase price) = 0.0120 positive pip difference = 120 pips
P/L in $USD Pip Profit (loss) * Pip Value 120 (pip profit) * $12.07 (pip value) = $1448 USD

 

Note on Cross Rates:

The difference between this formula and the indirect one is that in the calculation of the pip value there is an extra multiple with the base quote, which in this example above is the current EUR/USD price. This makes the calculation a little more involved than the previous two. These extra calculations with base quote and division with current rate makes all the pip values between the cross rate pairs differ, and all the pip values will dynamically change relative to the current rate that itself changes constantly.

 

Here Is A Table Breakdown Of All The Formulas, Side By Side:

Rate Types Pip Value Calculation P/L Calculation P/L to USD Calculation
Direct Rates Pip Value = lot size * tick size P/L = Selling Price – Purchase Price USD Profit = Pip Profit (loss) * Pip Value
Indirect Rates Pip Value = lot size * tick size / current rate P/L = Selling Price – Purchase Price USD Profit= Pip Profit (loss) * lot size * Pip Value
Cross Rates Pip Value = lot size * tick size * base quote / current rate P/L = Selling Price – Purchase Price USD Profit= Pip Profit (loss) * Pip Value

ALSO ON BEST FOREX ROBOTS | FX EXPERT ADVISORS | FOREX EA'S - BESTFOREXROBOTS.COM

  • Who Trades Forex
    Who Trades Forex
  • How to Start Forex Trading
    How to Start Forex Trading
  • What Is Forex Trading?
    What Is Forex Trading?
  • Trade Order Types
    Trade Order Types
  • Currency Pairs
    Currency Pairs
  • Transaction Costs
    Transaction Costs
  • Admiral Markets
  • ADR
  • AUDNZD
  • AUDUSD
  • Best Trading Forex Platform
  • broker
  • CAD
  • CHF
  • Cross Rates
  • Currency Pairs
  • Direct Rates
  • EURUSD
  • Forex Forex
  • Forex Robots
  • Forex Robots That Work
  • Forex Trading
  • Forex Trading Robots
  • Free Forex School
  • Free Forex Trading Account
  • GBP
  • How to Calculate Pip Value and Profit/Loss Manually
  • How to Forex Trading
  • indicator
  • Indirect Rates
  • Pip Profit
  • Pip Value Calculation
  • Pips and Profits
  • Profit Loss
  • Rate Types
  • Robots
  • UJ
  • USDJPY
  • What is a Pip
BEST FOREX ROBOTS | FX EXPERT ADVISORS | FOREX EA’S - BESTFOREXROBOTS.COMPrevious

Transaction Costs

BEST FOREX ROBOTS | FX EXPERT ADVISORS | FOREX EA’S - BESTFOREXROBOTS.COMNext

Currency Pairs

BESTFOREXROBOTS.COM On Facebook

BESTFOREXROBOTS.COM On Facebook

BESTFOREXROBOTS.COM Broker Rebates

Cash Back Forex Broker Rebates

BESTFOREXROBOTS.COM Trending News

BESTFOREXROBOTS.COM Latest Reviews

  • Best Forex Robots
  • Tags
Best Forex Robots
Tags

BESTFOREXROBOTS.COM Trending News

BESTFOREXROBOTS.COM Recommends

  • Best Forex Books
Best Forex Books

Copyright © 2008-2023 - BEST FOREX ROBOTS | FX EXPERT ADVISORS | FOREX EA'S - BESTFOREXROBOTS.COM

Don`t copy text!