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# Step by step how to count pips in forex trading pdf?

Forex trading is a popular form of investment that involves trading currency pairs. It is important for traders to understand the concept of pips, which is the smallest unit of measure in forex trading. Pips are used to measure the price movement of currency pairs, and they play a significant role in determining the profits or losses of a trade. In this article, we will explain step by step how to count pips in forex trading.

### Step 1: Understanding Pips

Pips are the smallest unit of measure in forex trading. They represent the price movement of a currency pair, and they are expressed in decimal points. For most currency pairs, the pip value is 0.0001, except for some currency pairs that have a pip value of 0.01. The pip value is used to calculate the profits or losses of a trade.

### Step 2: Determining the Pip Value

To determine the pip value, you need to know the currency pair you are trading, the current exchange rate, and the position size. The formula for calculating the pip value is as follows:

### Pip Value = (Position Size x Pip Value) / Exchange Rate

For example, if you are trading the EUR/USD currency pair with a position size of 10,000 units, and the exchange rate is 1.1234, the pip value would be:

### Step 3: Counting Pips

To count pips, you need to know the entry and exit price of your trade. The difference between the entry and exit price is the number of pips gained or lost. If the price moves in your favor, you gain pips, and if the price moves against you, you lose pips.

For example, if you enter a trade with the EUR/USD currency pair at 1.1234 and exit the trade at 1.1244, you have gained 10 pips. If you enter a trade at 1.1234 and exit the trade at 1.1224, you have lost 10 pips.

### Step 4: Calculating Profit or Loss

To calculate the profit or loss of a trade, you need to know the pip value and the number of pips gained or lost. The formula for calculating profit or loss is as follows:

### Profit or Loss = (Number of Pips x Pip Value) / Exchange Rate

For example, if you gained 10 pips on a trade with a position size of 10,000 units, and the exchange rate is 1.1234, the profit would be:

### Profit = 7.92

If you lost 10 pips on a trade with a position size of 10,000 units, and the exchange rate is 1.1234, the loss would be:

### Step 5: Using Pips to Manage Risk

Pips can be used to manage risk in forex trading. Traders can use stop-loss orders to limit their losses if the price moves against them. A stop-loss order is an order to close a trade at a specific price if the price moves against the trader. The stop-loss price is set in pips, and it is based on the trader’s risk tolerance.

For example, if a trader is willing to risk 50 pips on a trade with a position size of 10,000 units, the stop-loss order would be set at 1.1184 if the entry price is 1.1234. If the price moves against the trader and reaches 1.1184, the trade would be closed automatically, limiting the loss to 50 pips.

### Conclusion

Counting pips is an essential skill for forex traders. Pips are used to measure the price movement of currency pairs, and they play a significant role in determining the profits or losses of a trade. To count pips, traders need to know the entry and exit price of their trades and the pip value of the currency pair they are trading. Pips can also be used to manage risk by setting stop-loss orders based on the trader’s risk tolerance.