Last update 2020.08.11
If you are interested in forex you have probably already come across the terms pip or pips. This is because the pip is a technical term used in forex trading to describe the smallest price change. This article will describe what a pip is and answer the question: what is the best pip calculator?
Every community tends to create its own language and jargon. It is no different among forex market participants and traders. They have their own particular way of thinking about forex trading. That is why it is essential to understand what terms are used in forex, such as defining a pip.
Do you know what a pip is? The word PIP is an acronym for “price interest point” according to fxcm.com, or “percentage in point”. In both cases, the word pip (also written in lower case, as pip) designates the smallest price movement made by any exchange rate between two currencies.
Another way to think of one pip is 1/100 of 1% which is 1/10,000th of currencies quoted to four decimal places (such as the US dollar, where the smallest denomination is one penny).
Conversely, currencies such as the Japanese yen (JPY) which are already based in their smallest denomination are priced to two decimal places. In either case, a change of one pip would the smallest change in price in a given currency pair and would be reflected in the last digit.
Below are examples of one pip price changes for an arbitrary exchange rate:
- From 1.1005 to 1.1006, is an increase of one pip
- From 1.1005 to 1.1004 is a decrease of one pip
- From 104.20 to 104.21 is an increase of one pip
- From 104.20 to 104.19 is a price decrease of one pip
Do you notice the Japanese currency is priced differently?
In forex trading, Pips are normally the changes in the fourth digit after the decimal place, as we mentioned.
But the Japanese yen is different, because it is already priced in its smallest denomination (i.e., imagine, hypothetically, if the US currency was based on the penny, instead of the dollar, then the US currency would also be priced like the yen).
Knowing the difference between the why some pairs are four decimals places and others are five, when it comes to pips, is an example of why you need Wiseinvest’s financial content to be aware of all the details of the forex market. You should also never calculate PIPs again, because we have the best PIP calculator.
There are also fractional-pips which adds another decimal place to denote when a partial pip price change (i.e., 1.11115, where the 5 is a fraction of one pip).
Pricing forex in pips allows the traders to fine-tune their strategy and have a standard unit of measurement for all assets, and to facilitate communication between analysts and traders around the world.
Why use pips to calculate the trade result?
The reason pips are used to calculate forex trades is because leverage is used in currency trading, so even a tiny price change can have a significant profit or losses, depending on the trade size . When trading forex, your position consists of two simultaneous actions, a buy and a sell.
For example, if you are trading euro vs the US dollar (EUR/USD), and want to form a position to seize an upward market movement, you would buy the pair.
So, you start a buy EUR/USD (long) position, which means you have a contract buying EUR and selling USD. You are purchasing a specific quantity of EUR, such as one standard lot (100,000 units), and the price you are paying is quoted in USD as the ask price.
After the movement is complete you close your position selling the same quantity of EUR and buying USD, at the prevailing bid price.
If you were right, you would make proportional profit to the spread between the movements of those two currencies. If you were wrong that is the amount of your loss.
- For example, buying EUR/USD at 1.0955 and selling later at 1.0900, would result in a net profit of 45 pips (which is the positive difference between the buy and sell prices).
- Conversely, if you bought EUR/USD at 1.0955 and later sold it for 1.0900, you would have realized a loss of 55 pips, which is a negative difference between the buy and sell price.
This ability to measure profit and loss down to the smallest price increment is exactly what the PIP concept tries to capture in forex trading.
How to use pips to calculate trade result in forex?
Using again EUR/USD as an example about pips. Let’s give you some additional information. While I’m writing this article the market trade rate of this pair is 1.09186 (FXCM presents five decimal places to denote fractional pips, but the relevant digit goes only up to fourth).
My last position in EUR/USD made 4.1 pips of profit. And I traded 1,000 Contracts (the minimum amount in my Forex Broker). It means I made $0.41 cents (the main currency of my account).
To open this position my broker required $3.25 of my account margin from my account, which was used as collateral. So, after 35 minutes I had a profit of 12.61% over my invested margin.
To be more precise when calculated profit or loss, we should include the trade cost payed as the spread (difference between the bid/ask) to the forex broker. But even just looking at the difference in pips, excluding the spread, can give you a very good idea of why measuring via pips is better than by percentage alone.
The Best Forex Pip Calculator
While calculating pips in forex does not involve complex mathematical equations, it can be time consuming and tedious. We believe here at Wiseinvest that we have the best pip calculator for traders. The reason is that by using our Artificial Intelligence we make the pip conversion automatically to trade.
So, if you find any difficulty calculating pips, use our suggested calculator. Then, after subscribing to AI trading to trade automated for you, or AI Signals to stay up to data on the best trading signals, just copy the signals received in your email and paste them into the forex broker of your choice and wait for the outcomes to materialize. You can use our pip calculator and see our latest AI trades clicking here.
The best way to trade forex
There are two ways to invest with our AI in forex:
1. Automated with AI-Trading. Check out the 3 steps to trade automated with our AI.
Don’t you have a broker account yet? Our AI is integrated to trade automated with the broker Oanda. Click here to open an account.
With Automated AI trading you do not need MT4 / MT5 and other trading platforms to invest in forex. All forex trades are automatically placed into your broker account and you can monitor the AI trading performance directly on our dashboard.
2. Manually with AI forex signals.
Wiseinvest also provides AI forex signals that perfectly fit into MT4, MT5 and any trading platform. To trade with our AI forex signals, you must simply copy the data you receive from each real-time signal into any forex brokerage account of your choice.
There are five unique variables for each AI signal, and each must be copied exactly, in order to match the performance of the signal as close as possible.
Each AI forex signal alert consists of the following five data points:
- Symbol (forex pair)
- Direction (long or short)
- Position size (number of units or lots)
- Take profit (price level to exit with maximum gain)
- Stop loss (price level to exit with maximum loss)
You can trade forex with our free forex signals clicking here, or with our Premium subscription that provides you unlimited AI signals and automated AI trading in partner brokers. Whether you are a beginner or a Professional forex trader, our AI trading system can help you save time and improve your trading performance. Get started with free AI.
- Subscribe to a Wise-Plan.
- Open a Brokerage account. Check this article about the best forex Brokers.
- Set an amount and a position size on your Wiseinvest dashboard.
- Copy the signals that we will send to you via email and paste you’re your Brokerage account.
The forex signals are sent every time that our trading system powered by Artificial Intelligence (AI forex system) identifies a new trading opportunity.
When investing through Wiseinvest automated AI trading or AI forex signals, you do not need to calculate pips or change the leverage in your forex broker account. Learn more about leverage in forex trading clicking here.
- PIP or pip means the smallest change in a forex currency pair’s price.
- It is useful to use pips to describe price changes because it is easily understandable around the forex world.
- With Wiseinvest you do not need to care about pip calculating, because our Artificial Intelligence can do all the work for you.
With a very small amount of pips made you can earn a lot of money, depending on your trade size. Likewise, risk is also proportional, but we strive to manage risk efficiently with stop-loss levels included along with every signal. It is all into how you calculate you position.
That is why you need Wiseinvest Artificial Intelligence, we can provide forex trades with the right positions sizes and targets for live trading, based on your balance.
Disclaimer: Forex and Contracts for Difference (CFDs) are complex instruments and come with a high risk of losing money due to leverage. Forex trading is not suitable for everyone. You should consider whether you understand how forex and CFDs work and whether you can afford to take the high risk of losing your money.
The forex brokerages displayed shall disclaim the overall performance of traders in their platforms. Oanda warns that 76.8% of retail forex traders lose money trading CFDs. XTB warns that 80% of retail forex traders lose money trading CFDs. The forex broker Fxcm warns that 69.66% of retail forex traders lose money trading CFDs.
The performances aforementioned are not related to Wiseinvest AI forex trading and AI forex signals system. You can check the performance of our AI forex system on our dashboard.