A pip value for a specific order is calculated by the following formula.
For deals based on direct quotes:
Pip value = Minimum price change * Trading volume / Current rate
Example. We calculate the pip value for the USD/JPY deal with the trading value of 1 lot and the current rate of 112,197.
One lot is a trading volume of 100 000 units of a base currency. Minimum price change – 0.001.
We substitute the values:
0.001*100 000/112.197=0,89.
We get $0.89 of pip value for one lot of the sought deal.
For deals based on indirect quotes:
Pip value = Minimum price change * Trading volume
Example. We calculate the pip value for the GBP/USD deal with the trading volume of one lot and the current rate of 1.32043.
One lot is a trading volume of 100 000 units of a base currency. Minimum price change – 0.00001.
We substitute the values:
0.00001*100 000=1.
We get $1 of pip value for one lot of the sought deal.
Make a notice: while trading with 5th decimal quotes, 1 pip for indirect-quote deals always costs $1. The current rate is of no importance.
For cross deals:
Pip value = Minimum price change * Trading volume * Base currency price (USD) / Current rate
Example. We calculate the pip value for the GBP/USD deal with the trading value of one lot and the current rate of 1.9833. Current GBP/USD rate: 1.32043.
One lot is a trading volume of 100 000 units of a base currency. Minimum price change – 0.001.
We substitute the values in the formula:
0.001*100 000*1.32043/1.9833=66.57
We get $66.57 of pip value for one lot of the sought deal.
For deals with CFD on stocks, indexes, and commodities:
Pip value = Minimum price change * Trading volume * Current rate
Example. We calculate the pip value for a WTI** deal with the trading value of one lot. (** - symbols change depending on the current contract.
One lot is the trading volume of 1 barrel of oil for this instrument (please note: depending on the instrument, the value of one lot may vary. You can check the size of one lot in the instrument specifications in MT4. To do this, hover the cursor over the name of the instrument in the "Market Overview" window and select "Specification" in the menu that appears).
Current rate – 70.87, minimum price change – 0.01.
We substitute the values in the formula:
1*0.01*70.87 = 0,71
We get $0.71 of the pip value for the sought deal.