What Is Pip Value In Forex Trading?

This is a term you will see very often when trading in Forex. Another word for “Pip” is what’s known as the “Tick Value”. What this basically means is the lowest increment between two global currencies base on $10,000. The Pip value determines the small or shall we say the slightest movements amongst the exchange rates.

The way to calculate the Pip value is simple! First, you subtract one currency shifts against another (eg. AUD/USD). You get a decimal value which equals to 1 Pip (e.g 1 pip = 0.001). You then divide the value by the currency rate of the country and then times it by $10,000. The number you get will be the figure you earn for every ten thousand dollars invested in the currency, in this case the USD.

It can be fun to check out the Pip value so that you’ll know approximately how much you’re earning within those few seconds and because it is mainly used in currency futures, you may notice why the Pip are almost always fixed. Can this be a reason why so many traders and investors are moving away from currency futures to spot forex trading? Or Is it because the commissions charged by brokers are just too high?