Forex Pips And Spread 1

Forex pips or pips are the small measure of valuation used in foreign exchange trading. Pip is an acronym for Percentage in point. A percentage in point or pip is the smallest unit of measure whatever the way currency exchange rate fractions are displayed. Pips are also called points.

Currency is typically displayed up to 4 decimal points. As an example we will use USD and Euros. Let us assume the euro/USD currency pair is currently being traded 1.2000. After a while, the currency pair will do a 20 pip movement (30/100th of a percent). t. This will then be represented as 1.2020.

The Japanese yen incidentally, is an exception to the 4 decimal point norm. The Japanese yes is only calculated up to the second decimal point.

Forex pips can have their values calculated with widely available pip calculators for various assortments of currency pairings. Forex pips are central to foreign exchange trading strategies and pip calculators are often used to make forex trading decisions.

Forex pips are especially important in currency trading when they are used to describe the spread of a trade or exchange. The spread or the disparity between the ask price and the bid price, which pertains to the cost of doing business including or excluding commissions a trader may make is denominated or displayed in pips.