What is Pip?
“PIP” is the unit of measure used by Forex traders to describe the smallest price difference between two currencies. This is expressed in a standard Forex quote by a single digit movement in the fourth decimal place In forex quote.
For example, if the price of EUR / USD changes from 1.1402 to 1.1403 it would be a single pip or ‘ point ‘ move.
How to Calculate the value of Pip in Forex
The value of pip is calculated by the specific lot / contract size multiplying with one pip (0.0001). This involves 100,000 base currency units for standard lots and 10,000 units for mini lots. For eg, in a standard contract, looking at EUR / USD, a one-pip move is equivalent to $10 (0.0001x 100 000).
Value of Pip = Contract Size x One Pip
Value of Pip = 100 000 x 0.0001
Value of Pip = $10