Have you stepped into the online trading business? If yes, this article is for you. When you have entered into the online trading business, getting familiar with the online trading tools becomes mandatory. There exist multiple powerful online trading tools available in the marketplace to gear up trading skills & business. Among these powerful tools, the Online PIP Value Calculator has become the element of trading life.
If you have heard this term for the first time in your life, you must be clingy to know what PIP is!
So before riding into the roller coaster of an online PIP value calculator, first find out what term PIP holds in it.
How Do You Interpret PIP – Percent In Points?
Percentage in Points (PIP) is an acronym, shorthand, or abbreviation. According to a detailed definition of PIP, it’s the standard small value responsible for the change in the currency price (either gain or loss). It is located at 4th place (0.0001) after decimal or indicated as 1/100th of 1%.
To understand, assume a value as an example:
EUR/USD = 1.32167
In this example, 6 is the value of PIP. The difference in this rate will identify the gain and loss in trading. Likely, 1.32177 refers to an increase whereas, 1.32157 refers to a decrease in the value of a pip.
The Calculation Mode of PIP:
You can calculate the PIP by pairing the currency to distinguish it from one currency to another you are dealing with while trading. Likewise, in the USD/EUR currency pair, if you have to purchase euros, identify the worth of euros in dollars to avoid the risk of failure and predict the profit.
There are almost 50+ pairs of currency available in the PIP calculator tool to assist merchants in the online marketplace. From this, it is easy to idealize what we are going to discuss in the article below.
Let us get into the ride!
How Does an Online PIP Value Calculator Work?
After understanding the term PIP, it is a quick reach to know why an online PIP Value Calculator is the element of trading. PIP value calculator specifies the value of a specific PIP in the base currency of the trader. It will help traders to evaluate the risk hidden behind the trading in terms of Pip. It will make them able to measure the risk per trade.
Another feature of the PIP value calculator is that it can evaluate the pip value in various account types depending upon the magnitude of the trading.
4 Types of Account for PIP:
These four types of accounts for PIP streamline the trading process by identifying the PIP value more accurately and demonstrating the exact place of PIP in the decimal.
For criterion, the Value of PIP for USD Account:
Units of Currency
We consider this amount of the pip when the US dollar is at second place in a set of currencies such as EUR/USD, GBP/USD & AUD/USD, etc.
If the US dollar is not in the next spot in the pair of currency? Then, what to do!
In this condition, PIP Value for Non-USD Account:
● Simply ➗ the above value of PIP by USD/ABC price, where ABC refers to any other currency you want to compare.
Factors Involved in PIP Calculation:
Before starting the calculation, you need to know the factors that are involved in the trading. As without them, you can not proceed with the pip value calculation.
● Currency Set- the pairing of 2 currencies in which you want to compare the rates for trading such as EUR/USD.
● Trade Size- refers to the size of the trade, the portion of the dollar the investor intends to market. For example, you choose a mini trading lot size of 10,000 currency units.
● Deposit Money– it is usually the actual currency that handles any trade. Suppose you have deposited in EUR currency.
How is the PIP Cost Calculated?
Firstly, to estimate the cost of a pip, you need to know the rate of some factors. These factors have specific values that play a vital role which measure the risk associated with them. If any of these factors are not available, you can not calculate the pip value according to its formula.
So, let us explore it.
Supposewe have the following factors and prices to gauge the PIP:
● Currency Set/Instrument: EUR/USD
● Trade/Position Size: 10000
● Deposit/Account Currency: EURO
It is time to measure the amount of pip to compute the uncertainty linked among the marketing rates.
So, here is the formula:
Pip Value = (One Pip / Market Rate) x Lot Size
● One PIP = 0.0001
● Market Rate = 1.32167
● Lot Size = 10,000
Now, put all these amounts in the above-given formula:
Pip Value = (One Pip / Market Rate) x Lot Size
Pip Value = (0.0001 / 1.32167) x 10,000
Pip Value = €0.7566
Therefore, the amount of every pip is €0.7566.
After adding the above details to the PIP Calculator, you will get the above result. As per the above result, you can assume that while trading in the euro account, the pip price for a 0.10 lot of EUR/USD at a market/swap rate of 1.32167 is now worth €0.7566.
Significance of a PIP:
Owing to the above facts, it is visible that the PIP amount plays a vital role in online trading. But it is not engraved that it is the sole trigger to your successful trading. But it reduces risk with a combination of some other technical analysis tools available for online speculation.
To conclude the article, it is fundamental to transcribe here that the PIP assessment calculators are formed and erected to assist the marketing world. The online PIP value calculator comprehends all the factors adequately. It has a significant impact on account balance and overall trading.
Additionally, FOREX traders can access a broad range of tools and calculators available online. That can handle any input, whether they trade the FOREX market, cryptocurrencies, binary or digital options.
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