Pip stands for point in percentage and is used to measure the change in value between two currencies. Professional Forex traders worldwide express their gains and losses in the number of pips their position rises or falls.
The value of a pip is calculated by multiplying the amount of the trade-in lots by one pip in decimal form and then dividing it by the current exchange rate of the quote currency in your pair.
** You might come across the term fraction pip when trading. A fractional pip is one-tenth of a pip. Fractional pips are sometimes used to more precisely define fluctuations in forex rates.
Deposit currency: In Forex, deposit currency stands for the currency you chose to deposit your funds with when signing up with a broker and is available to see on your trading platform. The selected account base currency in our example is USD.
Currency pair: Trading Forex always involves two currencies at a time. These two currencies are referred to as 'currency pairs' and they're made up of the base currency and the quote currency. The difference in price is where you'll make your profit or loss. For the purposes of our example, let's use the currency pair GBP/USD.
Trade size: Forex is traded in specific amounts called lots, or basically the number of currency units you will buy or sell. There are typically 4 Forex lot sizes used for trading purposes, Standard lots (100,000 currency units), Mini lots (10,000 currency units), Micro lots (1,000 currency units) and Nano lots (100 currency units).
The results: The pip value calculator uses live Forex market prices and calculates the current pip values based on your pre-filled values.
