As we have specified in earlier page, in order to calculate the pip value or how much is one pip, you have to know some additional information such as: trading size (how many lots), leverage used, and the actual rate of the pair for which you want to calculate the pip value
Calculation Formula for currencies with USD as quote currency
(or X/USD such as EUR/USD, GBP/USD, and AUD/USD)
(Selling Price - Buying Price) x lot size x number of lots = Profit / Loss
Example :
- Buy 3 standard lots EUR/USD at 1.2000
Sell (liquid) 3 lots EUR/USD at 1.2010
Profit = (1.2010 - 1.2000) x 100.000 x 3 = $300 - Sell 1 standard lot GBP/USD at 2.0001
Buy (liquid) 1 lot GBP/USD at 2.0000
Profit = (1.2001 - 1.2000) x 100.000 x 1 = $10
As you can see from example number 1 and 2, for every standard lot (100K) the profit is $10/pip.
How to calculate profit per pip ? Profit/pip = total profit / total pips
Example number 1 : $300/3 = $10/pip
Example number 2 : $10/1 = $10/pip
Conclusion : (applies for x/USD Pair only !)
For every 1 standard lot, profit (loss) = $10/pip
For every 1 mini lot, profit (loss) = $1/pip
For every 1 micro lot, profit (loss) = $0.1/pip
Calculation Formula for currencies with USD as base currency
(or USD/X such as USD/JPY and USD/CHF)
[ (Selling Price - Buying Price) / Closing (liquidating) Price ] x lot size x number of lots = Profit / Loss
Example :
- Buy 1 standard lot USD/JPY at 110.00
Sell (liquid) 1 lot USD/JPY at 110.01
Profit = [ (110.01 - 110.00) / 110.01 ] x 100.000 x 1 = $9.09
[ (Selling Price - Buying Price) / USD/JPY Closing Price] x lot size x number of lots = Profit / Loss
Contoh :
- Buy 1 standard lot EUR/JPY at 162.70
Sell (liquid) 1 lot EUR/JPY at 162.71
USD/JPY closing price of the previous day is 118.10
Profit = [ (162.71 - 162.70) / 118.10 ] x 100.000 x 1 = $8.47
If you open a Buy position (going Long), you will open with offer price, and will have to use bid price while selling it back (liqudating, closing, stop loss, and taking profit)
If you open a Sell position (going Short), you will open with bid price, and will have to use offer price while selling it back (liqudating, closing, stop loss, and taking profit)
Profit Target, Stop Loss, and Trailing StopProfit Target is a target point at which you want to liquidate your position in profit automatically, when the market price hits it. This means, you dont have to monitor your open positions all the time, just set a profit target, and once market price hits it, your position will be closed in profit automatically
Stop Loss order ensures a particular position is automatically liquidated at a predetermined price in order to limit potential losses if the market moves against an investor's trade.
- If you open a Buy or Long Position, profit target level should be placed Higher than opening price.
- If you open a Sell or Short Position, stop loss level should be placed Lower than opening price.
Example : - Buy (Long) EUR/USD 1.2000 (offer price)
Profit Target 1.2050 (50 pips profit target, bid price)
Stop Loss 1.1950 (50 pips stop loss, bid price) - Sell (Short) EUR/USD 1.2000 (bid price)
Profit Target 1.1950 (50 pips profit target, offer price)
Stop Loss 1.2050 (50 pips stop loss, offer price)
