If you are new to FX trading, terms like pipettes and lots can be a problem. Right?

Pip is not that difficult thing to understand. Still, before doing it, you must know that you have to pay attention and do some mathematics. If you hate math, then it is going to be a bit difficult for you.

So, let’s know everything about pip that you must know as a person who is connected with the forex market as a trader or as a broker:  

What is a Pip in Forex? (Easiest Definition)

Pip is a pretty common term in FX that you will hear every day as a trader or broker, but what is a pip in forex. As you know, FX trading is exchanging of currencies and earning profit. Right? So, pip is a term used to express the value of change in currencies.

We will understand it by an example, just like Math. For example, you have two currency pairs, EUR, and USD (EUR/USD). Now, if this pair moves from 1.200 to 1.201, then that 0.001 USD is the pip. Generally, you can assume that the value at the end of the decimal value of the price quote is the pip. In this case, that ‘1’ at the end is the pip. Got it?

Most currency pairs go up to four decimal places, but some pair like the Japanese Yen goes up to two decimal places. Here is a table to understand pip in a better way:

We are going to make a table of a value of a number with four decimal places  

What is Pipette in FX?

Now, after knowing what is a pip in forex, you must know what a pipette is. Many people think that pip and pipette are the same terms, but what you all think is not that easy. But still, they are pretty similar terms. 

You can say that fractional pip is a pipette that is also called point. But you must be thinking, what is a fractional pip. We all know that currency pairs are usually in decimal places up to 2 or 4 places. But some FX brokers proceed with them in 3 to 5 decimal places.

So, to conclude them as different terms, experts named pip for 3 to 5 decimal places as fractional pip. If you are confused about these terms and their differences, read this section again because another thing can confuse you more than before. A pipette is equal to a tenth of a pip. 

How to Calculate Pip? (Conclusion)

Every currency has a different value, so you have to calculate pip for every value every time. Pip value depends on three factors:

• Currency pair.

• Size of trade.

• Exchange rate. 

Assume that here we have two pairs CAD/USD and gain is 15 pip. Now, to find pip, determine the quote currency numbers. Then multiply the amount with one pip:  100,000 x 0.0001 equal to 10 (and the currency name here we use CAD). Now, divide the result with the exchange rate (in the case of CAD and USD, it is 1.0568). So, the answer will be 9.4625 USD per pip. Now, multiply it with gain in pip. So, you will get a profit of 141.9379 USD.