Understanding Forex PIPs
Forex pips are also known more commonly as percentage in points, and are the basic measurements in which profit
or loss is measured when it comes to trading in the FX market. Pips or percentage in points, are quite popular in
algorithmic and machine based formulations. Pips are normally 1 of one hundredth of a full point, and traders will
try to make as many positive pips as possible, as each move up means cash. It is the basic denominator of how the
market works and is also known as the smallest and most minor price increment in currency trading.
Within the Forex market environment, they are said to be quoted to the fourth point in decimal for most major
currencies except for some, which can include Asian currencies like the Japanese Yen, which is traded up to two
decimal pip points.
Why are they important to Forex traders? Well the reason is simple. Everything that is done in the Forex
environment, day trading, spot trading – are all in the hope that they can gain some positive pips. You might here
FX traders say they made more than 500 pips a month. Each pip is cash in hand, and the more pips made, the more
money made. Of course this all depends on whether or not these pips are positive or negative. In any market
situation, the other side of the coin is extremely possible and negative percentage in points means that your
trading strategy is not working out and you are losing cash.
Different currencies have varying pip values, which will be described shortly. The variations are due to price
changes as market moves from region to region, and of course they depend on the type of currency pair that is
traded. For example, the USD/JPY currency pair, a pip is worth about $0.77. For the more popular EUR/USD, a pip is
worth a full one dollar. One look at the popular currency pairs across markets will reveal the fact that a pip has
no constant value. It depends on many factors, the currencies traded, how they are paired, which regional market
they are operating in and the amount of bids done in a day. This represents one of the basic information that you
need to know if you are beginning to find the online paper trade intriguing.
Yes, it is a viable option for anyone to trade, or who have lost faith in more traditional markets. Investors
cannot be blamed, the economic crisis has left the global workforce at odds with the situation and avenues are
required to open up new revenue streams. The online paper trade is a good option for anyone to get extra cash, or
have something to fall back on. Pips are the gateway to huge profits, and make sure you know how to make as many
positive pips as possible. Learn all you can about the intricacies of the FX market, Forex pips, ways you can trade
and most importantly, read market psychology.