SO, WHAT IS A PIP AND IT'S VALUE?
Okay, so let me break it down in terms that may be more easily understood by the everyday layman.
We all understand Centimetres and Millimetres, I presume? LOL.
A standard kitchen appliance - oven, fridge, freezer, washing machine, tumble dryer, dishwasher etc are typically 600mm wide - but some might refer to them as 60cm wide,
So, you would drop the last digit from millimetres to make it centimetres and that is basically what we're doing with PIPs.
So what is a PIP? It stands for Point In Percentage and is a simple measurement of the price movement in the market.
In this example, I have chosen the currency pair GBPAUD and I simply chose the price that it was at, at the time of writing this article. So if you go to a "Bureau De Change" to change your money, you won't necessarily see the price listed like the image above. You might see 1.8310. Although having just checked an online travel rate site, they are showing 1.7758 for GBPAUD (quite a difference right?). So, in this example, one British Pound equals 1.8310 Australian Dollars.
However, the final digit is still a valid part of the price, it is just a 10th of the PIP value and not considered worth listing.
When you choose your lot size that is used against the last digit, so if you had $100 dollar account and were trading with a $0.01 lot size, the price above would have to move to 1.83112 for you to achieve $0.10 - and that is a 1 PIP price move. So if price on this currency pair moves upwards by 10 PIPs, you would achieve $1.00. If it moves upwards 100 pips, you would achieve $10.00 and so on (if you were buying of course). If you were selling you would be watching for the price to move down by 10 pips or 100 pips.
You may be watching my 100 trades report and on day one, I captured 134 positive pips, which was another good day. So from what I told you above, you can work out what the lowest amount of money that I made was. Okay, I'll do the sums for you... It would be $13.40.