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Forex how many pips per trade?

Forex, or foreign exchange, is the largest financial market in the world. It is a decentralized market where currencies are traded globally 24 hours a day, five days a week. Forex traders buy and sell currencies in the hope of making a profit from the changes in their values. A pip is a unit of measurement used in Forex to measure the change in the value of a currency pair. In this article, we will explore what pips are and how many pips per trade are needed to make a profit.

What are pips?

Pip stands for “percentage in point.” It is the smallest unit of measurement in Forex. One pip is equal to 0.0001 of a currency unit. For example, if the EUR/USD currency pair increases from 1.2000 to 1.2001, it has moved up by one pip. Similarly, if the USD/JPY currency pair decreases from 109.50 to 109.49, it has moved down by one pip.

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The value of a pip varies depending on the currency pair being traded and the size of the trade. For example, if you are trading the EUR/USD currency pair and your trade size is 100,000 units, the value of one pip is $10. If you are trading the USD/JPY currency pair and your trade size is 100,000 units, the value of one pip is 1,000 yen.

How many pips per trade are needed to make a profit?

The number of pips per trade needed to make a profit depends on several factors, including the currency pair being traded, the size of the trade, and the level of leverage used. Generally, traders aim to make a profit of at least 10 pips per trade.

To understand why 10 pips per trade is a common target, let’s consider an example. Suppose you are trading the EUR/USD currency pair with a trade size of 100,000 units and a leverage of 1:100. If the price of the EUR/USD pair moves up by 10 pips, you will make a profit of $100. If the price moves up by 20 pips, you will make a profit of $200, and so on.

However, it is important to note that making a profit in Forex is not just about the number of pips gained or lost. Other factors such as the spread, trading costs, and market volatility can also impact your profitability.

How to calculate pip value

To calculate the value of a pip, you need to know the currency pair being traded, the size of the trade, and the current exchange rate. The formula for calculating pip value is:

Pip value = (0.0001 / Exchange rate) x Trade size

For example, let’s say you are trading the USD/JPY currency pair with a trade size of 50,000 units and the current exchange rate is 109.50. The pip value would be:

Pip value = (0.0001 / 109.50) x 50,000

Pip value = $4.56

This means that for every pip the USD/JPY currency pair moves, you will gain or lose $4.56.

Conclusion

Pips are a crucial part of Forex trading. They allow traders to measure the change in the value of a currency pair and calculate their profits or losses. The number of pips per trade needed to make a profit depends on several factors, including the currency pair being traded and the size of the trade. A common target for traders is to make a profit of at least 10 pips per trade. However, it is important to remember that making a profit in Forex is not just about the number of pips gained or lost. Other factors such as the spread, trading costs, and market volatility can also impact your profitability.

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