How to Calculate Pips

Calculate pip values using the notional amount.

A pip is the smallest increment in foreign-exchange trading (FOREX). For instance, a move from 1.8100 to 1.8101 is a 1 pip movement; that is, a pip is equal to .0001. Traders use this to determine the value of 1 pip in each currency given a certain notional value.

Things You'll Need

• Calculator or spreadsheet

Instructions

1. Determine the notional amount. This is the size of the currency. For instance, the nominal value of 100,000 Japanese Yen (JPY) is 100,000. Let's say you want to find the value of one pip to exchange 10,000 EUR/USD (euro/dollars). The notional is EUR10,000.

2. Determine the currency exchange rate. There are numerous outlets that provide quotes for foreign currency. See Resources to a link to a popular online quote website. Let's say the exchange rate for EUR/USD is .8942.

3. Divide the value of 1 pip by the exchange rate. The calculation is: .0001 x .8942 = .00008942.

4. Calculate the value of a pip. Multiply the answer in Step 3 by the notional amount. The calculation is .00008942 x EUR10,000 = 1.1183.

References

• ForexTraining: How to Calculate Pip Values
• ThisMatter: How to Calculate Leverage, Margin, and Pip Values in Forex

Resources

• Oanda: Currency Converter