HOW TO CALCULATE PIPS IN FOREX
So, you are a new day trader and want to learn how to calculate pips on different currencies, whether forex, cryptocurrencies, or indices. Calculating pips is a fundamental skill for any newcomer.
This guide will explore essential tools you should use daily to aid your trading.
Understanding Pip Calculation
This guide will require you to check TradingView, since it allows you to check the calculations easily.
Euro/USD Example
When trading the Euro/USD pair, the current price might be 1.19226. This means that for every one Euro, you receive 1.19226 US dollars.
To calculate pips, you start counting four decimal places from the right. If the price moves from 1.19226 to 1.19227, that is an increase of one pip. A move to 1.19326 represents a change of 10 pips.
Using the measuring tool in TradingView, you can visualize this change. For instance, a small space measuring 10 pips can be seen using the tool on the left-hand side of the TradingView interface, which looks like a ruler.
GBP/JPY Example
For the GBP/JPY pair, the price might be 150.302. Here, you move the decimal point two places to the right, then count back four places. If the price changes from 150.302 to 150.312, that represents an increase of one pip. Similarly, a change to 150.412 indicates a change of 10 pips.
The Measuring Tool
The measuring tool in TradingView is invaluable. You can measure the number of pips in a specific time range by clicking Shift and then clicking and dragging.
This tool helps you quickly calculate pip changes across different pairs and indices.
Pip Calculation in Cryptocurrencies and Indices
When trading cryptocurrencies or indices, the pip values can be significantly higher. For example, a single candle in the Bitcoin/USD pair might represent 22,968 pips, which equates to a $229 price difference. This large pip value is why traders with small accounts should avoid trading indices or cryptocurrencies with high volatility.
Similarly, a single candle in the US 30 index might represent 946 pips. Thus, understanding the pip value and its impact on your trading is crucial.
Lot Sizes and Their Impact
In forex trading, there are three primary lot sizes:
Micro lot (0.01)
Mini lot (0.10)
Standard lot (1.00)
For beginners trading with real money, it is advisable to start with micro lots to manage risk better. Larger lot sizes can result in substantial gains or losses, which might overwhelm new traders.
Conclusion
Utilizing the measuring tool in TradingView will enhance your ability to calculate pips and manage trades effectively. Starting with a demo trading account is recommended to familiarize yourself with different lot sizes and pip values without risking real money.
Mastering pip calculation and using the right tools can significantly improve your day trading performance and make more informed decisions.