Pip stands for “percentage in point” and is the smallest unit of measurement in forex trading. It is used to measure the change in the exchange rate of two currencies. The value of a pip depends on the currency pair being traded, the size of the trade, and the exchange rate. In this article, we will discuss what is pip worth on 100000 forex.
To understand the concept of pip, let’s take an example of EUR/USD currency pair. Suppose the current exchange rate of EUR/USD is 1.1200. If the exchange rate increases by one pip, it means the new exchange rate is 1.1201. Similarly, if the exchange rate decreases by one pip, the new exchange rate will be 1.1199. The value of a pip is usually expressed in the quote currency, which is the second currency in the currency pair. In the case of EUR/USD, the quote currency is USD.
The value of a pip depends on the size of the trade. In forex trading, trades are usually measured in lots. A lot is a standardized unit of currency, and its size depends on the broker. The most common lot size is 100,000 units of currency, also known as a standard lot. If we take the example of EUR/USD, one standard lot is equivalent to 100,000 euros.
Now let’s calculate the value of a pip on 100,000 forex. The formula to calculate the value of a pip is:
Value of a pip = (0.0001 / Exchange rate) * Lot size
In the case of EUR/USD, the value of a pip can be calculated as:
Value of a pip = (0.0001 / 1.1200) * 100,000
Value of a pip = 8.93 USD
This means that if the exchange rate of EUR/USD increases by one pip, the value of a standard lot will increase by 8.93 USD. Similarly, if the exchange rate decreases by one pip, the value of a standard lot will decrease by 8.93 USD.
It is important to note that the value of a pip can vary depending on the currency pair being traded. For example, the value of a pip on USD/JPY currency pair will be different from the value of a pip on EUR/USD currency pair. This is because the exchange rate of USD/JPY is different from the exchange rate of EUR/USD.
In conclusion, pip is an important concept in forex trading, and its value depends on the currency pair being traded, the size of the trade and the exchange rate. If you are trading a standard lot of 100,000 units of currency, the value of a pip can be calculated using the formula discussed above. Understanding the value of a pip can help traders in managing their risks and making informed trading decisions.
