# What is a pip and what is its value?

By default, all results on this website are displayed in pips. This makes understanding pretty much straightforward. But what is a pip we are referring to? A pip is the smallest change of a currency pair rate.

Now that there are so many currency pairs, different instruments, software applications and brokers, the definition of a pip and its value may be different. However, Signalator uses its classic definition of a pip to represent the results of trading.

As an example, we will use the EUR/USD currency pair rate with 4 and 5 digits with 1.2353 and 1.23531 respectively. If your broker provides a four-digit price, a one-pip change will be 0.0001 whilst for a five-digit rate it will be 0.00001. As you can see, the difference is as big as 10 times. The value of a pip is ten times more for the first example compared to the second. As a general rule, Signalator uses 1 pip value as a \$1 result if traded with 0.1 lot on currency pairs like EUR / USD or any similar (XXX / USD).

The value of a pip is based on two things which are the currency pair you trade with and the currency your account is nominated. Signalator here and throughout the whole website uses account details nominated in USD.

## How To Calculate The Value Of A Pip?

XXX / USD Currency pairs.

To calculate a value of a pip, we have to understand what a pip is in terms of real money. Any currency rate is a ratio of one currency's value to another. For example, 1.6357 GBP/USD means 1 Great Britain Pound (GBP) equals 1.6357 United States Dollars (USD). GBP is the first currency, and USD is the second currency within the GBP/USD currency pair. Trading forex is actually buying and selling a certain amount of currency. You operate with lots (standard, mini and micro lots). The standard lot is 100,000 units of the first currency in a currency pair. Trading through brokers allows you to open 100,000 units (1.0 standard lot) having only \$1,000 by means of leverage (1:100 in this case).

The money value of a pip depends on how much you have opened (or how many lots / units you are trading with). Let us assume, we buy (open a position) GBP/USD at 1.6437 with 1.0 standard lot and sell it back (close the position) at 1.6489. The profit in pips will be = 1.6489 - 1.6437 = 0.0052 or 52 pips. In terms of money, the profit will be 52 * \$10 = \$520. It is derived from the simple calculation: when we buy 1 standard lot, we spend 164,370 USD to buy 100,000 GBP. At the time we sell (close the position), the rate is 1.6489 which means the 100,000 GBP we have, will be converted back to USD and we will receive \$164,890. As we paid initially \$164,370, the difference is our profit = \$520. If we had opened only 0.1 lot the profit would have been only \$52.

If your trading account is USD, then you will receive profit or loss in USD. If your account is in EUR for example, a broker will automatically calculate the value of USD in EUR and the result of a trade will be displayed in EUR.

USD / XXX Currency pairs.

If you trade instruments like USD / CHF or USD / CAD and similar, then the situation with the calculation of profit is the same as described above. In this case, your trading is based on the USD and you buy / sell the USD. We will use these pairs as the results will be quite different because of the value of each currency to USD (as of July 2023).

USDCHF. You open a position for 100,000 CHF. The currency rate as of 12/07/2023 is 0.8774. It means 1 USD = 0.8774 CHF or 1 CHF = 1.1397 USD. So, if we need to open a position of 100,000 CHF then we need to spend 113,970 USD. Imagine, the currency rate at the time we close a trade dropped to 0.8745. The movement is 29 pips. It means 1 USD = 1.1435 as the price of CHF to USD has risen and 100,000 CHF we have at the moment equals 114,351 USD. If we have opened the Short (Sell) position then we have to cover the 113,970 we have initially used from the converted money and the difference is our profit. 114,351 - 113,970 = 377,95 USD. If we initially opened a Long (Buy) position, then it would be our loss of -377,95 USD.

USDCAD. The calculations are exactly the same as for the USDCHF but the devil is in the details. As the currency rate of USDCAD as of 12/07/2023 is 1.3224, it means 1 USD = 1.3224 CAD or 1 CAD = 0.7562 USD. Again we open 100,000 units of the second currency which is CAD and we need to reserve the corresponding amount of USD which is 100,000 / 1.3224 = 75,621 USD. Once again, we will use the same pip movement of 29 pips.

XXX / XXX Currency pairs.

For all other currency pairs without USD like EURJPY, GBPCAD, EURGBP, etc. the calculation is the same. You buy 100,000 units of the second currency against the first currency. Then the result in cash will be made in the second currency and if this second currency is different from your trading account currency it will be converted to your currency.

## How come negative pips results are profitable in USD or percentage and vice versa?

When you trade only one currency pair, then the results will always correspond between the pips calculated results and the net profit in your currency and percentage to a deposit. However, if you trade several currency pairs with different pip values, then you may face a situation when the overall profit in pips is negative but you actually received a net profit in terms of money and percentage to a deposit. The vice versa situation may also happen when the net profit in your currency (in real money) is negative but you have the profit in pips. This is an absolutely normal situation that may occur with any trader at any stage of trading.

The traded amount is important for the calculation

We assume we trade the same amount of lots. If the traded amount is different you shall first convert all amounts to one value, e.g. if you traded 10 pips with 1.0 lot and 25 pips with 0.2 lots, it actually means you made 250 pips for the first trade and 50 pips for the second trade with 0.1 lot trading. So, in total, you have 300 pips in trading, not 35 pips.

Not corresponding results calculation

If we trade the same amount for each pair we do not have to convert all trades to the same number of lots we traded. Otherwise, we will need first to bring all trades to a common denominator (be it 0.1, 0.01 lot or whatever you use).

Now that we have all numbers prepared, we have the following results. We will use 0.1 lot as the calculated lot size. Several USDCHF for a net of +75 pips, USDCAD trades with -95 pips in total, XAUUSD with 65 pips profit and USDJPY with -80 pips. A total of -35 pips. So, the net result in pips is negative. As you may derive from the text above, 1 pip value can be different and in this case, 1 pip for USDCHF is 1.1386 USD, 1 USDCAD pip is 0.7569 USD, 1 XAUUSD pip = 1 USD and 1 USDJPY pip = 0.7162.

We receive the following USDCHF => +75 *1.1386 (+85.39 USD) + USDCAD => -95*0.7569 (-71.91 USD) + XAUUSD =>+65*1 (+65 USD) + USDJPY => -80*0.7162 (-57.29 USD). A total of +21.19 USD.

The final results

Now the results are as follows. We have a net of -35 pips and +21.19 USD at the same time, on the same account. Now you see the reasons why it happens and you should not suspect someone of faking the results if you see such inconsistencies within the results.