Pip value

Family IV · Costs

Not to be confused with pip, pip forex, forex pip.

Pip value is the money amount represented by a one-pip move in an open position. It is derived from the pip size, the position size, and the currency in which the account is denominated. Because pip size and quote conventions differ across pairs, pip value is not a fixed number.^[1]

Calculation

For most pairs, pip value in the quote currency is the pip size multiplied by the number of units traded. If the account currency differs from the quote currency, the result is converted at the prevailing exchange rate. The formula is:

Pip value (quote currency) = pip size × units
Pip value (account currency) = pip value (quote currency) × conversion rate

For pairs quoted to four decimal places, the pip size is 0.0001; for pairs quoted to two decimal places, it is 0.01. Some brokers quote certain pairs to five or three decimal places, where the pip is still the fourth or second decimal place respectively.

Worked example

Pip value for 100,000 units of EUR/USD

Pip size0.0001—

Units100,000—

Pip value in quote currency (USD)0.0001 × 100,00010.00 USD

Pip value in account currency (USD)10.00 × 1.000010.00 USD

If the account were denominated in euros, the 10.00 USD would be converted to euros at the EUR/USD rate. For a pair such as USD/JPY, quoted to two decimal places, the pip size is 0.01 and the pip value is in JPY, then converted to the account currency.

Variation

Pip value changes with position size and with the pair traded. A standard lot of 100,000 units of a four-decimal pair gives a pip value of 10 in the quote currency, but a mini lot of 10,000 units gives 1, and a micro lot of 1,000 units gives 0.10. For pairs where the quote currency is not the account currency, the conversion rate introduces a further variable. Brokers may also define pip size differently for certain instruments, so the contract specification should be checked.

Often confused with

pip: A pip is the unit of price movement itself, not its monetary worth; the visible sign is that a pip is expressed as a price increment such as 0.0001, while pip value is expressed as an amount of currency.
pip forex: Pip forex refers to the pip convention in foreign exchange, whereas pip value is the cash equivalent of that pip for a given position; the visible sign is that pip forex describes the fourth decimal place, while pip value gives a number such as 10.00 USD.
forex pip: Forex pip is another name for the pip in currency trading, not the monetary calculation; the visible sign is that forex pip is a price unit, while pip value is a money amount.

References

↑ Contract specifications published by the broker or exchange for each instrument. Lot sizes, tick sizes and pip values are set per instrument and differ between venues; read the specification for the symbol you trade.

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