One of the basic terms that a trader must understand for Forex trading is Pip. What is pip? The term that is used to describe the change in the rate of currencies in a pair is called Pip. Mostly pip is observed as the last decimal number of a quote.
If GBP/USD moves from 1.8740 to 1.8741, then that slight change of 0.0001 in the rate of the currency is called one Pip.
Pipette is also called “points”. It is also termed as ‘Fractional pip’ as well. It is actually a value equal to the tenth of a pip.
If GBP/USD shifts from 1.30542 to 1.30543, although there is a slight change in the value, yet that slight change of 0.00001 is called a pipette.
How to read a pip?
The price quote of most of the pairs has 4 decimal numbers but in case of some particular currency pairs such as the pairs of Japanese yen have only 2 decimal numbers in their price quote. The value and exchange rates of a currency pair are expressed as: USD/CAD at 1.0200, it will be read as 1USD/1.0200 CAD.
How to calculate a Pip?
You can easily calculate a pip by using a simple formula. The change in the value of the counter currency multiplied by the exchange rate is equal to pip in case of base currency.
The value of Pip in your own account:
Now the question that will come to your mind is ‘What is the value of Pip in my own account?’ Obviously pip will be converted to the currency your account would be trading. But you don’t have to do all these calculations at all. Well you just need a broker for Forex trading to handle such calculations. Thus choose and select a trustworthy broker and go for it.