“Forex PIPs?” If you’re wondering how to trade Forex one question you’ll be quite possibly be asking yourself is What are Forex PIPs? Often adverts for Forex Trading Software mention forex PIPs but don’t really explain what they are or how they work. Today, we shed a little light on the issue.
PIP stands for Percentage In Point and it’s the smallest price increment in Forex Trading – in this case it goes through to the 4th decimal point. So, if for example the USD/GBP is bid at 1.6001 and offered at 1.6006 we would say that the spread (difference) is 5 pips wide. So basically, 1 PIP is 0.0001. Simple really!
Of course, nothing is ever quite that simple. For the Japanese YEN it is only quoted to the second decimal point, i.e. 0.01. So if the USD/JPY is bid at 129.04 and offered at 129.06, the spread is 2 pips.
I’m keeping this article short, stay tuned for the next one which will detail how to calculate how much one forex pip is worth.
Interested in trading on the USD/JPY pair? It can be quite a successful currency pair to trade on. Forex Funnel follows this currency pair and is especially designed to take advantage of it. Find out more about Forex Funnel USDJPY in our Forex Funnel Review.
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