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- How do you calculate the value of 1 pip?
How do you calculate the value of 1 pip?
Here's the formula you'll need to calculate the value of one pip: OnePointValue = (Contract × (Price + OnePoint) ) - (Contract × Price)
- OnePointValue: the value of a pip expressed in the quote currency
- Contract: the size of the contract in the base currency
- Price: the price of the currency pair
- OnePoint: the minimum price change for the trading instrument (one pip)
- Quote Currency: the second currency in a currency quote
- For EURUSD, the quote currency is USD.
- For GBPCHF, the quote currency is CHF.
- For EURGBP, the quote currency is GBP.
Example: Let's calculate the value of one pip on GBPCHF in USD.
- Contract Size (in lots): 1.43
- Trading Instrument: GBPCHF
- GBPCHF Rate: 2.3533
- Contract Size (in base currency): 143,000 GBP
- USDCHF Rate: 1.1659 (we need this quote to convert the pip value into USD)
Now we'll do the math:
- OnePointValue = (143,000 × (2.3533 + 0.0001) ) - (143,000 × 2.3533) = 336536.2 – 336521.9 = 14.3 CHF
A quick note: If USD is the quote currency in the quote we are using to convert the value of one pip to USD (for example when converting the pip value in pounds to dollars with the GBPUSD rate) we will need to multiply the pip value in the quote currency by the exchange rate in the quote we are using to make the conversion to dollars (Pip Value in Pounds × GBPUSD Rate = Pip Value in USD). In this example, since USD is the base currency in USDCHF, we need to divide the pip value in Swiss Francs by the rate for USDCHF:
OnePointValue = 14.3 CHF / 1.1659 = 12.27 USD
- So, for our example, we can say one pip is worth 12.27 USD.
With spot metals, the value of one pip is fixed. You can learn the value of one pip on our different spot metal instruments in our Contract Specifications. With other currency pairs, the value of one pip can be calculated the same way as in the example above.
- Don't worry. Calculating the value of a pip is much easier with our "Trader's Calculator".
- For currency pairs whose rate is shown to the fifth place after the decimal point (0.00001) in the trading terminal, one pip is the minimum change in the fourth decimal place (0.0001). For pairs whose rate is shown to the third place after the decimal (0.001), one pip is the minimum change in the second decimal place (0.01).
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More Frequently Asked Questions about Trading Terms:
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- How do you calculate the value of one pip?
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