Pips are percentage in points. In other words it is the smallest amount of a currency, (Kinda like a penny in the US). In this example .8891 the pip is the 1. If you sold a currency at .8891 and it moved to .8861 then you have a gain of 30pips. Or in the dollar/yen pair 108.93 the pip is the 3. The pip is the last number after a series of numbers behind the decimal point making it the smallest amount of the currency.
Why pips? Pips are how traders get paid, it is the way profits and losses are calculated.
How to calculate pips:
If I sold a currency at .8750 and it went up to .8800, then I would subtract the smallest number from the largest number to figure out what my profit or loss was. In this case:
.8800-.8750 =50pips lost
Now if I sold at .8750 and the price fell to .8700 then it looks like:
.8750-8700=50pips gained (then I get paid)
Always subtract the smaller number from the larger number whether you buy or sell.
You can obtain more in-dept information on pips from your broker. This is just a quick overview. Basic information like this from your broker is fine, it is just strategic information that you have to be wary of.
Happy trading, Have a great life!!!!!!!
This blog is not in anyway an enticement or solicitation to trade in the Forex Market. These tips are for informational purposes only and are not to be substituted for legal advice or council. I have written this blog in hopes that it will help you to avoid some of the terrifying pitfalls I had in the Forex Market before I learned better.