How to Figure Out FOREX PIP Count

A pip is the last decimal place in a currency price.

Understanding pip counts is an essential part of investing in the foreign currency market, or the forex. A pip represents each incremental currency price movement. Brokers and dealers quote currency prices in pairs of currencies, such as the euro versus the U.S. dollar. Each price consists of four decimal places except for currency pairs that contain the Japanese yen, which have two decimal places. The last decimal place in each price quote is a pip. You can determine the number of pips a currency price changes by counting the change in the last decimal place.

Instructions

Currency Pairs without the Japanese yen

1. Determine a price quote of a currency pair that doesn't contain the Japanese yen before and after a price change. For example, assume the euro/U.S. dollar pair's price is 1.4440 before a change and 1.4490 after a price change.

2. Subtract the beginning price from the ending price. A positive number represents a price increase, while a negative number represents a price decrease. For example, subtract 1.4440 from 1.4490, which equals 0.005.

3. Multiply your result by 10,000 to determine the price change's pip count. For example, multiply 0.005 by 10,000, which equals 50. This represents a price increase of 50 pips in the currency pair.

Currency Pairs with the Japanese yen

1. Determine a price quote of a currency pair that contains the Japanese yen before and after a price change. For example, assume the U.S. dollar/Japanese yen pair's price is 80.46 before a change and 80.21 after a price change.

2. Subtract the price before the change from the price after the change. A positive number represents an increase in price, while a negative number represents a decrease in price. For example, subtract 80.46 from 80.21, which equals -0.25.

3. Multiply your result by 100 to determine the pip count of the change in price. For example, multiply -0.25 by 100, which equals -25. This represents a price decrease of 25 pips in the currency pair.

References

• National Futures Association: Trading in the Retail Off-Exchange Foreign Currency Market: What Investors Need to Know
• University of Colorado Boulder: Exchange Rate Determination