In the Forex market, traders constantly deal with pips (Pip) as it is the unit of measurement for price changes in currency pairs. Understanding the value of each pip and how to calculate it plays a crucial role in capital management and determining potential profits and losses. In this article, we will comprehensively examine the concept of pips, how to calculate their value, and the impact of trade volume on pip value.
What is a Pip in Forex?
A pip (Pip) is the smallest unit of price movement in a currency pair. For most currency pairs, one pip equals 0.0001 (the fourth decimal place). For example, if the price of EUR/USD moves from 1.1050 to 1.1051, this change represents one pip.
For currency pairs that include the Japanese Yen (JPY), the pip value is different. In these cases, one pip equals 0.01 (the second decimal place). For example, if the USD/JPY rate changes from 134.50 to 134.51, this also represents a movement of one pip.
How to Calculate the Value of Each Pip?
The value of each pip depends on three main factors:
The currency pair being traded
The trade volume (lot size)
The exchange rate at the time of the trade
The formula to calculate pip value is:
Pip Value = (One Pip / Exchange Rate) × Trade Volume (Lot Size)
Below, we provide a few examples for better understanding.
Examples of Pip Value Calculation
1. Calculating Pip Value for EUR/USD
Suppose the exchange rate for EUR/USD is 1.2000, and the trader is trading one standard lot (100,000 units).
Pip Value = (0.0001 / 1.2000) × 100,000
In this case, each pip in EUR/USD is worth 8.33 USD.
2. Calculating Pip Value for USD/JPY
Suppose the exchange rate for USD/JPY is 135.00, and the trader is trading one standard lot (100,000 units).
Pip Value = (0.01 / 135.00) × 100,000
In this case, each pip in USD/JPY is worth 7.41 USD.
By understanding pip values and their calculations, traders can better manage their risk, optimize their trade strategies, and make informed trading decisions.
The Impact of Trade Volume on Pip Value
Trade volume, or lot size, has a direct impact on pip value. In the Forex market, trade volume is typically categorized into three main levels:
Standard Lot (1 lot) = 100,000 units
Mini Lot (0.1 lot) = 10,000 units
Micro Lot (0.01 lot) = 1,000 units
For example, if a trade is executed with 0.1 lot (mini lot), the pip value will be one-tenth of the value calculated for a standard lot.
Example: If in EUR/USD, the pip value for 1 standard lot is $8.33, then in a mini lot (0.1 lot), it would be $0.83.
How Much is Each Pip Worth in Gold (XAU/USD)?
In gold trading (XAU/USD), one pip equals 0.01 USD, meaning that if the price of gold moves from 1950.00 to 1950.01, this change represents one pip.
Formula for Calculating Pip Value in Gold
Pip Value for Different Trade Volumes in Gold
1 Standard Lot (100 ounces of gold) → Each pip = $1
0.1 Mini Lot (10 ounces of gold) → Each pip = $0.10
0.01 Micro Lot (1 ounce of gold) → Each pip = $0.01
Example Calculation of Pip Value in Gold
If a trader opens a 1-lot gold trade and the price changes by 1 pip (0.01 USD):
Therefore, in a 1-lot gold trade (100 ounces), each pip movement = $1 profit or loss.
Why is Knowing the Pip Value in Gold Important?
Better risk and capital management
Accurate calculation of profit and loss in each trade
Selecting the appropriate trade volume (lot size) based on the trading strategy
The value of a pip in gold depends on trade volume, but in a standard lot (100 ounces), each pip is equal to $1.
Why is Knowing the Value of a Pip Important?
Better risk management – Traders can determine their risk per trade by understanding the pip value.
Accurate profit and loss calculations – Knowing how much each pip is worth helps traders estimate potential profits and losses and adjust their trading strategies accordingly.
More effective trade planning – Traders who are aware of pip values can set precise entry and exit points for their trades.
A pip is one of the fundamental concepts in the Forex market that every trader must understand. The value of each pip depends on the exchange rate, trade volume, and currency pair. A specific formula is used to calculate pip value, helping traders manage their capital more efficiently.
Understanding pip value can reduce risk, increase profitability, and improve overall trading performance. Therefore, it is recommended that traders always consider pip values in their trading strategies and use pip value calculators for better trade analysis.
How Many Lots is One Pip?
In the Forex market, a pip (Pip) represents price changes, while a lot (Lot) determines the trade volume. These are two separate concepts, meaning one pip is not equivalent to a specific number of lots.
The Relationship Between Pips and Lots in Forex Trading
A pip represents a price movement (e.g., if EUR/USD moves from 1.1050 to 1.1051, it equals 1 pip).
A lot determines the trade volume, categorized as follows:
- 1 Standard Lot = 100,000 units of the base currency
- 0.1 Mini Lot = 10,000 units of the base currency
- 0.01 Micro Lot = 1,000 units of the base currency
The Relationship Between Pip Value and Trade Volume (Lots)
The value of each pip depends on the trade volume, as shown below:
- 1 Standard Lot (100,000 units) → Each pip ≈ 10 units of the quote currency
- 0.1 Mini Lot (10,000 units) → Each pip ≈ 1 unit of the quote currency
- 0.01 Micro Lot (1,000 units) → Each pip ≈ 0.1 unit of the quote currency
Example Calculation for EUR/USD at a Rate of 1.2000:
| Trade Volume (Lots) | Trade Size (Units) | Pip Value (USD) |
| 1 Standard Lot | 100,000 | $10 |
| 0.1 Mini Lot | 10,000 | $1 |
| 0.01 Micro Lot | 1,000 | $0.10 |
Conclusion: Pip value depends on the trade volume, and it is not possible to say how many lots equal one pip. Instead, it is necessary to specify the trade volume to determine the pip value accurately.
How to Calculate Pips in TradingView (TradingView Pip Calculation)
TradingView is a technical analysis platform that provides tools to measure pip values. You can calculate pips in this platform using the following methods:
1. Using the “Ruler” Tool
Step 1: Right-click on the price chart and select Measure.
Step 2: Mark the starting and ending points.
Step 3: View the Pips (pip count) in the information window.
2. Manual Pip Calculation
For regular currency pairs (EUR/USD) → Each pip = 0.0001 price change
For JPY pairs (USD/JPY) → Each pip = 0.01 price change
For gold (XAU/USD) → Each pip = 0.01 USD price change
3. Using Pip Calculation Indicators
Go to Indicators.
Search for Pip Counter or Pip Calculator.
Select and add the indicator to the chart.
Why is Knowing the Pip Value Important?
Better risk management – Traders can determine the risk per trade.
Accurate profit and loss calculations – Knowing pip values helps traders estimate potential profits and losses.
More effective trade planning – Traders who understand pip values can set precise entry and exit points.
A pip is one of the most important concepts in Forex that determines price changes.
The value of each pip depends on the currency pair, trade volume, and live exchange rate.
Understanding pip value is essential for risk management and profit/loss calculation.
Having a clear understanding of this concept helps traders improve their trading and control risk more effectively.