Therefore, for most major currencies:

1 Basis Point = 1/10000

th of 1% = 1 Pip

While the Japanese Yen, which is only quoted to the hundredths place follow the traditional

definition of:

1 Basis Point = 1/100

th of 1% = 1 Pip

This is not cut and dry, though. The

depending on:

1) The currency pair being traded

2) The base currency used in your trading account.

3) The

Now we have a new term to define before we proceed: What is 'lot size'?

actual value of a pip can be fixed or variable,lot size of your trade.

Lot size

about volume. Almost no one trades unit for unit, or 'dollar for dollar', although some brokers

do allow this.

The typical lot size for most trades, though, is in multiples of ten:

refers to the size of your transaction or 'contract'. Again, trading on Forex is all



A Standard Lot = 100,000 units of the base currency



A 'Mini' Lot = 10,000 units of the base currency



A 'Micro' Lot = 1,000 units of the base currency

Calculating Pip Values

This is one area where new investors can become very confused. This is because pip

values are dependent on multiple variables.

The standard definition says that a pip is equal to a change of 1/100

currency, but this change

Instead, one must take into account whether the currency pair in question has a fixed value

or a variable value

decimal places

As you saw earlier, the EUR/USD pair is typically quoted to 4 decimal places, such that if

the exchange rate were to shift from '1.4436' to '1.4437', you can say that is has gained a

full basis point, or 1 pip.

Contrast this with the USD/JPY pair, which is only quoted to 2 decimal places. In this case, a
move from 113.27 to 113.26 represents 1 pip at a value of .01.th in the value of ais not measured solely against the previous value of the currency!relative to the lot size. Further, one must take into account how manyare quoted for the pair.

Posted in: