What are Pips?
A pip is a unit of measure that represents the smallest change in value between two currencies. If the EUR/USD decimal point changes from 1.1055 to 1.1056, then 0.0001 represents an increase of 1 pip. For almost all currency pairs, points are counted from the fourth decimal place. One exception is the Japanese Yen, where points are counted from the second decimal place. An example of a quote is shown below. View the pips for the currency pairs shown below:
GBP/CAD = 1.65723
USD/JPY = 110.890
EUR/USD = 1.13455
Let's learn how to calculate the value of 1 pip.
We will take the USD/JPY pair as an example, with an exchange rate of 110.890
(0.01（Pips）/110.890（Exchange Rates）X 100,000（Standard）= 9,01 dollars per pip
Pips
Exchange Rates
Standard
For a 13 pip trade, you would earn approximately 117.13 dollars.
Let's calculate the dollar that is not the base currency.
For example, EUR/USD. The exchange rate is 1.13.
(0.0001/1) X 100,000 = 10 dollars per pip
Pips
Standard
For a 5 pip trade, you would earn approximately 50 dollars.
What is a Trading Lot?
A trading lot is a measure of the number of currency sizes a trader is trading. When you place an order to trade an open position, the order will be quoted in lots. A standard lot is 100,000 currency size, but there are other lot sizes- mini, micro and nano. A mini-lot is 10,000 contract size, a micro lot is 1,000 contract size, and a nano lot is 100 contract size. These smaller lot sizes are ideal for new traders who wish to trade the market with less capital while minimizing potential losses.