How many dollars is 100 pips?
If you have heard of Forex, or even researched for the smallest amount of time, you most likely have heard the term “pip”. If you don’t know anything about about Forex you might be thinking about how many dollars is 100 pips worth? The answer to this question requires some explanation about Pips, how they are calculated, and what determines their worth.
What Are Pips?
Pips are a basic concept of the foreign exchange market, also known as Forex. PIP is short for Point In Percentage, and is the unit of measurement that is used to define the smallest possible change in value between two currencies. In all Forex currency pairs, except JPY (Japanese Yen) pairs, you will see up to 5 digits to the right of the decimal. An example would be a quote on the GBP/USD pair at a price of 1.36854. In this case the “5” would be the digit that you would start counting pips with. If the price moved to 1.36874, then that would be a 2 pip move.
The 5th digit to the right of the decimal is the pipette, or the point. If price on GBP/USD moved from 1.36854 to 1.36862, then it would be a 8 point move. There are 10 points in a PIP. Keep this in mind as some sites will use that bit of math to trick you. For example, if I told you that a pair moved 100 points last night, you might get overly excited. However, that would be a 10 pip move. Yes, they are the same, but most humans will get caught up in seeing the larger number and not realize they are the same.
As mentioned earlier, JPY pairs are calculated a bit differently. A pip in ALL JPY pairs is calculated at the second decimal point. Thus if USD/JPY is quoted at 103.751, the second digit after the decimal, the 5, is the pip. If price were to move to 103.761, it would be a 1 PIP move, or a 10 POINT move.
What is a Pip Worth?
The answer to this question is very much, “it depends.” For example, if you are trading pairs where USD is the second currency, then the smallest amount a PIP is worth is 10 cents. Let’s tak a look at how that number is reached.
Previously unmentioned until now is the “lot size” and it plays a very important part in the value of that pip. The smallest lot size that you can trade in MetaTrader4 (MT4) is a .01, which works out to 1,000 units. Now we are going to multiply the trade size (the lot size) by 1 pip, which for USD pairs is .0001.
1,000 x 0.0001 = 0.10
Since the secondary currency is USD, this means that the 0.10 is equal to 10 cents.
What if you were trading a lot size of 0.08? That would be 8,000 units, so your math would look something like this.
8,000 x 0.0001 = 0.80
Therefore each PIP in this trade would equal 0.80, or 80 cents.
This applies for all currency pairs that have USD as their secondary currency: EURUSD, GBPUSD, AUDUSD and NZDUSD.
How many dollars is 100 pips?
Now that we know something about what a pip is, and how to calculate the value of a pip, we can finally answer the question, “How many dollars is 100 pips?” Okay, well we can sort of answer the question. Without knowing what pair was traded, or the lot size involved in the trade, then you have no real way of know how many dollars 100 pips would work out to. However, if you know the lot size and currency pair involved, you are able to run some math and determine what the value is.
For a USD/JPY trade executed with a .01 lot size, 100 pips would equal a $10.00 USD profit. (It could also equal a loss of the same amount.)
A USD/JPY trade executed with a lot size of .1 would have the value of a pip equal to $1.
10000 units x .00001 = $1. Thus a 100 pip move of a USD/JPY trade in this instance would be equivelent to a profit of $100.
As you can see your lot size is going to affect the value of your trade and your potential profit. You should be aware that it also means you could lose your money even faster in a trade that doesn’t go your way. In fact with some brokers you could lose MORE than your initial investment.
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