August 28th, 2010

Pips Explained

Posted in Finance

Originally written by Forex BulletProof

Fx trading pips are an important part of foreign exchange trading that any trader must grasp. Brokers customarily translate pips into dollars and cents for you, or into the currency that your account is held in, if it is not US dollars. However , when comparing two trades with different position sizes it is the profit or loss in pips that tells you more than the profit in greenbacks.

PIP stands for percentage in point. It is used as a measure of change in price . Spread is also measured in pips. The pip is the smallest part of the measured cost of a quoted currency. 1.2315. In this case one pip is 0.0001 units of the quote currency. So if that price changes to 1.2316, the price has increased by one pip.