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# What is 20 pips in forex?

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Forex trading is a complex and exciting world that can be quite intimidating for beginners. One term that is commonly used in forex trading is “pips.” Pips are a unit of measurement that is used to indicate the movement of a currency pair in the forex market. A pip is short for “percentage in point” or “price interest point.” It is a small unit of measurement that represents the fourth decimal place in a currency pair. In this article, we will discuss what is 20 pips in forex trading, how to calculate it, and how traders use it.

### What are Pips?

As mentioned earlier, a pip is a unit of measurement that represents the smallest change in value between two currencies. It is used to measure the movement of a currency pair in the forex market. For example, if the EUR/USD currency pair moves from 1.1200 to 1.1210, it is said to have moved 10 pips. Most currency pairs are quoted with four decimal places, except for the Japanese yen, which is quoted with two decimal places.

### How to Calculate Pips?

Calculating pips is simple. You need to know the currency pair you are trading, the trade size, and the current exchange rate. Let’s take an example. Suppose you are trading the EUR/USD currency pair, and the current exchange rate is 1.1200. You have bought 1 standard lot, which is equal to 100,000 units of the base currency. To calculate the value of each pip, you can use the following formula:

### Pip Value = (0.0001 / 1.1200) * 100,000 = \$8.93

This means that every time the EUR/USD currency pair moves by one pip, your profit or loss will be \$8.93.

### What is 20 Pips in Forex Trading?

A 20 pip move in forex trading refers to a movement of 20 units in the fourth decimal place of a currency pair. For most currency pairs, this represents a movement of 0.0020 in the exchange rate. Let’s take the same example we used earlier. Suppose you have bought 1 standard lot of the EUR/USD currency pair at an exchange rate of 1.1200. If the exchange rate moves to 1.1220, you have made a 20 pip profit. On the other hand, if the exchange rate moves to 1.1180, you have made a 20 pip loss.

### How Traders Use 20 Pips in Forex Trading?

Traders use 20 pips in forex trading to set profit targets and stop-loss orders. A profit target is a level at which a trader wants to take profit on a trade. A stop-loss order is a level at which a trader wants to exit a trade to limit their losses. Traders often use 20 pips as a profit target or stop-loss level because it is a small and achievable goal. It also allows traders to maintain a positive risk-to-reward ratio, which is essential in forex trading.

For example, if a trader is trading the EUR/USD currency pair and has bought 1 standard lot at an exchange rate of 1.1200, they may set a profit target of 20 pips at 1.1220. This means that if the exchange rate reaches 1.1220, the trader will take profit and close the trade. If the trade goes against them, the trader may set a stop-loss order at 1.1180, which is 20 pips below the entry price. This means that if the exchange rate reaches 1.1180, the trader will exit the trade to limit their losses.

### Conclusion

In conclusion, a 20 pip move in forex trading refers to a movement of 20 units in the fourth decimal place of a currency pair. Traders use 20 pips as a profit target or stop-loss level because it is a small and achievable goal. It also allows traders to maintain a positive risk-to-reward ratio, which is essential in forex trading. Calculating pips is simple, and traders can use the formula discussed in this article to determine the value of each pip. Understanding pips is crucial in forex trading, and traders must master this concept to become successful in the forex market.