A pip is a common term that is used in the forex market. It refers to the smallest movement (not considering fractional pips) that a currency exchange rate can make. For example, if the GBP/USD exchange rate changed from 2.0010 to 2.0012, you could say that it increased by 2 pips.
Most currency pair exchange rates are priced to the fourth decimal place, frequently making the fourth decimal place represent the pip value. However, for currency pairs like the USD/JPY, which are only priced to the second decimal place, the pip value is not the fourth decimal place but instead the second. So a two pip increase could be represented by a change of 85.35 to 85.37.
Calculating price changes in pips helps you determine transaction costs, profit and loss on trades, among other things.
No comments:
Post a Comment