Forex Education Center/ Part 27 / FOREX FOR BEGINNERS COURSE / Lesson 8. Forex Pip

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Welcome to the Forex for Beginners course.
As a reminder the course is aimed for complete beginners.
I tried to keep the lessons short and to the point giving out clear examples and videos where required.

Lesson 8. Forex Pip:
What is Pip?
Lets explain what it is since this is the most important term that you need to understand.

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For some reason many people (the beginners) find it hard to understand what a pip is.

I can’t blame them since many people find it hard to explain in simple terms what a pip is.

So a pip is simply the following:

If the price right now for EUR/USD is 1.2876 and a split of a second later it is 1.2877, the price has moved up by 1 pip.

Again if the price right now for EUR/USD is 1.2876 and a split of a second later it is 1.2875, the price has moved down by 1 pip.

So a pip is just a measure of how much a price has moved (up or down) in a currency pair.

All currency pairs use pips to measure the price movement, including the Yen even though the price is measured in two decimal places.

For example if the price for USD/JPY is 102.12 and moved up to 102.15, the price has moved up 3 pips.

5 Digit Brokers
As we said many brokers display their prices using 5 digits, so in the above example EUR/USD would be 1.28765.

1 Pip up move is still 1.28775 and NOT 1.28766. Similarly.

1 Pip down move is still 1.28755 and NOT 1.28764.

So do not get confused with the 5th digit. If there is a way to eliminate the 5th digit in my broker I just do it!

Ok, so we said that all currencies use pips to measure the change in the exchange rate, up or down.

So EUR/USD use pips, GBP/USD use pips, USD/CAD use as well pips! All use pips!

So the question is, how much is the value of a pip in a specific currency if my broker account is opened in US Dollars?

If I am trading USD/CHF, what is the value in US Dollars of 1 pip?

Similarly the same question applies to GBP/USD or EUR/USD. How much 1 pip is worth?

That is a very important piece of information that you need to know for effective money management, just to protect your capital.

We will go in to detail of how to calculate the value of a pip in a later article because there is still things to know prior calculating the pip value.

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Thanks For Reading,
@lordoftruth
Samer

Below you can find the list with all the posts of Forex Education Center:

 

Part 01 / Live Vs. Demo Trading Accounts

Part 02 / Slippage

Part 03 / ECN Market

Part 04 / What Makes a Successful Price ActionTrader 

Part 05 / The Manual of the Forex Art of War

Part 06 / The Don’ts when you Compare Forex Brokers

Part 07 / What is behind Currency Pair Trading

Part 08 / Banks: Beacons of Fraud

Part 09 / Win With CFD’s

Part 10 / Fight and Win the Bulls and Bears

Part 11 / How to Spot a Forex Trading Fraud

Part 12 /  Become a Master with News Trading

Part 13 / The Forex Risk Management State of Mind

Part 14 / Top 10 Forex Trading Tips for Beginners – The Road to Success

Part 15 / Trader’s Strategy Checklist

Part 16 / E Currency Trading

Part 17 / E CURRENCY TRADING MAP

Part 18 / FOREX TRADING TUTORIALS

Part 19 / FOREX TRADING COURSES

Part 20 / FOREX FOR BEGINNERS COURSE / Lesson 1. Trading Currency Pairs

Part 21 / FOREX FOR BEGINNERS COURSE / Lesson 2. What is scalping

Part 22 / FOREX FOR BEGINNERS COURSE / Lesson 3. Intra Day Trading

Part 23 / FOREX FOR BEGINNERS COURSE / Lesson 4. End of Day Trading

Part 24 / FOREX FOR BEGINNERS COURSE / Lesson 5. Traders Psychology

Part 25 / FOREX FOR BEGINNERS COURSE / Lesson 6. Best Trading Hours

Part 26 / FOREX FOR BEGINNERS COURSE / Lesson 7. How to interpret Prices of 

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