Forex Pip Calculator

How is pip value calculated in Forex currency trading?

First: If the dollar is the counter currency, the pip value is calculated using the following equation:

Then the value of the output in dollars is converted by multiplying by the exchange rate.
Example:
If the exchange rate of the pair (EUR/USD) = 1.2000, and the contract size is 100,000, the pip value is calculated as follows:
Point value in Euros = (0.0001÷1.2000) x 100,000 = 8.333 Euros
But profits and losses are calculated in dollars, not euros, and therefore we have to convert euros into dollars by simply multiplying by the exchange rate, which in this case is (1.2000) as follows:
Point value in dollars = 8.333 x 1.2000 = $10.
For this reason, when the dollar is the counter currency, the point price in US dollars is always fixed as follows

• In case of a standard contract, the point equals $10.
• In case of a mini contract, the point equals 1
• In case of a micro contract, the pip is equal to 0.1 dollars, or 10 cents.

Second: If the dollar is the base currency, the pip value is calculated using the following equation:
Pip value in dollars = (0.0001 ÷ exchange rate) x contract size
Example:
If the exchange rate of the pair (USD/CHF) = 1.0100, and the contract size is 100,000, the pip value is calculated as follows:
Pip value in dollars = (0.0001 ÷ 1.0100) x 100,000 = 9.7 USD
But note that the Japanese Yen pairs are calculated to an accuracy of 0.01 instead of 0.0001 because the Yen pairs consist of only two decimal places.
Example:
If exchange rate of the pair (USD/JPY) = 120.00, and the contract size is 100,000, the pip value is calculated as follows:
Pip value in dollars = (0.01 ÷ 120.00) x 100,000 = 8.333 USD

For more information about point calculation, Check out this educational article