PIP
- What is a PIP, in forex trading you listen this word very often. PIP is abbreviation for ‘Percentage In Points’.
- The ratio between any two currencies gives us some percentage that number is PIP, in general we have to consider 4 Digits as maximum after the decimal point even though we have infinity digits in percentage.
- Let’s see how Pips calculation goes.
First of all one should know what is PAIR in FOREX TERMS. European currency EURO € and United States currency Dollar $, we can call these two currencies as PAIR in one form EUR/USD. So EUR/USD is a pair, in the same manner every currency can be paired with the other.
Now if we take price RATIO of EUR and USD.
1 EUR = 73.49 INR
1 USD = 64.70 INR
EUR/USD = 1.13585780526
NOTE : NOT ONLY INR WE CAN USE ANY OTHER CURRENCY .
After the decimal we have to consider only 4 digits. In this example the four digits are 1358. So pip value is 1.1358. As the price changes percentage changes then pip value changes. Let’s see how to count the pips
INCREASING DECREASING
1.1358 - 1.1359 one pip 1.1358 - 1.1357 one pip
1.1358 - 1.360 two pips 1.1358 – 1.1356 two pips
1.1358 - 1.1363 five pips 1.1358 – 1.1353 five pips
1.1358 – 1.3658 ten pips 1.1358 – 1.1348 ten pips
We can calculate change from one pip to infinity pips in increasing or decreasing order.
PIPLET :
Most of the trading software’s gives you 5 digits after decimal which we can call ‘PIPLETS’. Now see the difference between PIP and PIPLET
If EUR/USD changes from 1.3585 to 1.13685 then it moved 10 pips or 100 piplets don’t get confused take last 3 digits the difference from 585 - 685 is 100 piplets or simply 10 pips.
So if we don’t consider the last digit in both the 1.13585 and 1.13685 then they will be 1.1358 and 1.1368 the difference from 58 – 68 is 10 pips
So piplets are like ‘cents in dollar’, 10 dollars can also be called as 1000 cents in the same manner 1 PIP can be called as 10 PIPLETS.
Depending on the broker the PIPS/PIPLETS will be counted. If the broker is ‘4 digit broker’ he gives you maximum of 4 digits after decimal, if the broker is ‘5 digit broker’ he gives you 5 digits after the decimal.
