What is a PIP?

What is a PIP?

You will continually see ads for "No charge" trading - and then they on time brag their low PIP spreads... But do you have any plan what a PIP really is?

As Forex trade there are no relations, a PIP is a fancy way of charging you an swap over fee, and saying that you don't have any commission. Just recognize this - the Forex firms are not non-profit organization, so one way or one more, they are going to make their money. The best thing to know is that a PIP is their take of the money - and be aware of how they're planned. The below information explain how to compute point price (PIP):

All coins pairs can be subdivided into three sound groups - pairs with direct quote (EURUSD, GBPUSD), pairs with opposite quote (USDJPY, USDCHF), and cross tax (GBPCHF, EURJPY etc.).

· The pip price for currency pairs with direct quote is intended according to the following formula

[pip] = [lot size] × [tick size]

where [tick size] - is the least possible modify in price, for example for USDCHF and EURUSD it's 0.0001. For currency pairs with direct quote the pip price is steady.
Example.
EURUSD. Lot size is 100,000, tick - 0.0001. [pip] = 100000 * 0.0001 = $10.00

· For currency pairs with inverse quote:

[pip] = [lot size] × [tick size] / [current quote]

For currency pairs with contrary quote the pip price varies depending on the current quote.
Example.
USDJPY. Lot size is 100,000, tick - 0.01. If current quote is 129.20, [pip] = 100000 * 0.01 / 129.20 = $7.74

· For cross rates:

[pip] = [lot size] × [tick size] × [base quote] / [current quote]

where [base quote] - the there base pair quote.
Example.
GBPCHF. The lot size is J62500; if the current quote is 2.3000 and the base GBPUSD quote is 1.4550, [pip] = 62500 * 0.0001 * 1.4550 / 2.3000 = $3.95.

What is a PIP?

Muhammad Saleem Ahsan