How to calculate the value of 1 Pip in Forex

Traditionally, the Pip was defined as the minimum variation that could occur in the price of a certain product. Still, with time, more precise methods arrived to set the price by increasing the number of decimals, thus dividing the Pip into points, therefore, we can say that the Pip expresses the change in value between two currencies.

How are currency pairs quoted?

Currency pairs are quoted in money and the exchange rate is expressed with 5 decimal places, except in the crosses with the Japanese yen (JPY) since these are quoted with 3 decimal places.

Therefore, we can say that 1 Pip is equivalent to the variation of 10 points.

Let's assume for example the following typical spreads:

• Typical spread on EURUSD is 0.8 Pips --> 8 points

• Typical spread on GBPUSD is 1 Pip --> 10 points

• Typical spread on USDCAD is 1.6 Pips --> 16 points
  
  

How to calculate the Pip value?

The pip value in Forex is calculated with the following formula:

Pip Value = Volume * Pip

Example in EURUSD:

• 1 lot --> Pip Value = 100.000 * 0,00010 = 10 USD

• 2 lots –> Pip Value = 2* 100.000 * 0,00010 = 20 USD

• 0,5 lots --> Pip Value = 50.000 * 0,00010 = 5 USD

• 0,01 lots --> Pip Value = 1.000 * 0,00010 = 1 USD

Example in USDJPY:

• 1 lot --> Pip Value = 100.000 * 0,010 = 1000 JPY

• 2 lots --> Pip Value = 2* 100.000 * 0,010 = 2000 JPY

• 0,5 lots --> Pip Value = 50.000 * 0,010 = 500 JPY

• 0,01 lots --> Pip Value = 1.000 * 0,010 = 10 JPY

Below, we can see a table with the value of the Pip in some of the main currency pairs:

* As we can see in the previous table, the exchange rate does not affect the value of the pip, since we only have to multiply the volume by one pip

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