The value of one pip
In trading forex, people talk about pit. So, what is the value of one pip? Now, let's calculate the value of one pip on FOREX on GBP/CHF.
Just suppose, we buy 1 lot at 2.2200 and sell at 2.2201.
When opening position we buy 100,000 GBP and sell 2.2200 * 100,000 = 222,000 CHF.
Closing position we sell 100,000 GBP and buy 2.2201 * 100,000 = 222,010 CHF.
GBP are mutually canceled and Swiss franks are remained +10 CHF, which is +10 / (the rate of USD/CHF) = +10 / 1.6010 = 6.25 USD.
Thus by earning 1 pip on 1 lot on FOREX on GBP/CHF we get profit of $6,25.
This is the value of 1 pip on GBP/CHF.
On other currencies the pip value is calculated the same way.
As, an example for beginners in this market to easily figure out pip value.
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8th July 2010, 10:11
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