In previous educational articles, we have looked at pips and explained what they are, how to read currency pairs and the different types of ‘lots’. Now we are going to see how to calculate the monetary value of a pip. As a reminder, a pip is the measure of the change in the exchange rate of a currency pair and corresponds to the fourth decimal digit in pairs like the EURUSD, and the second decimal digit in Japanese Yen-based pairs. The formula for calculating how much 1 pip is worth, per 100 000 units (or 1 lot) of the base currency, is **Amount of Base Currency X Pips = Amount in Quote Currency**. So, for EURUSD for example, the applied formula would look like this: 1 lot (€100,000) X 0.0001 = $10. For Yen-based currency pairs, the result is a little different because the pip’s position is different. The value of 1 pip in USDJPY is 1 lot ($100,000) X 0.01 = ¥1000. Let’s look at a practical example using a trade: a trader buys 1.5 lots of GBPUSD at 1.3030. Once the price rises, for example to 1.3043, he decides to close his position. Now he’s made a profit of 13 pips. The formula in this case would look like this: 1.5 lots (£150,000) X 0.0013 = $195 of profit!

## More on Beginner's Education

## What is Forex?

## What is a Pip?

A point in price – or pip for short – is a measure of the change in the exchange rate of a currency pair. It is the smallest unit of measurement we use when trading currencies. Most currency pairs are measured to five decimal places. For pairs such as EURUSD, GBPUSD a...

## What is a Bid Price/What is an Ask Price?

The Bid price is the price a forex trader is willing to sell a currency pair for. Ask price is the price at which a trader will buy a currency pair. Both of these prices are given in real-time and are constantly updating. So for example, the British pound against the...