4m 45s: Lenght

http://ForexTradingRoom.tv - a home to a Free Live Trading Sessions. http://ForexProAnalytics.com http://SmartForexTraders.com Explaining the smallest whole increment used in Forex Trading. Welcome to ForexTradingRoom.TV What Is A PIP? In the forex global market all profits and losses are calculated by units referred to as pips. Currency prices typically move in tiny increments. These values are small fluctuations in the changing value of the exchange rate. Pipss are the measurement tool forex traders used to calculate the estimated profit or loss in a currency exchange. So, how do we use pips to determine market value? A pip stands for percentage in points. This value is determined by the fourth digit to the right of the decimal. This is equal to one hundredth of a percent. A change in one hundred pips would mean a change of one percent and it represents the smallest amount at which the exchange rate can fluctuate. When the PIP value increases it means the base currency is strengthening. When the value decreases the base currency is weakening. The only exception to this measurement is found in the Japanese yen. The yen is measured in pip values that represent the value of two positions to the right of the decimal place. Currency paired with the Japanese yen will always have a pip value that is two decimal places to the right. This represents a trading unit that is one tenth of a percent. Let's use an example from the previous lesson. The British pound sterling and the US dollar will act as our currency pair. The value of the british pound is one and the US dollar is 1.4628. If the value goes up from 1.4628 to 1.4632 the British pound has strengthened and market value of the pound sterling has increased by four pips. If the value of the british pound shifts from 1.4628 to 1.4625 this means the position has weakened and the market value has decreased by three pips. And when comparing the US dollar to the Japanese yen the same principles apply. Let's say the US dollar is the base currency and the Japanese yen is 142.40. If the quote changes from 142.40 to 142.80 there was an increase of 40 pips. In this scenario the Japanese yen has weakened and value of the US dollar has strengthened. This translates to more buying power on the side of the US dollar currency. Exchange rates are always measured against the value of the base currency. So, what is the monetary value of a single pip? This cash value varies based on the trade relationship between a currency pair. For example, you can choose to trade a currency pair like the American dollar and the euro. Here the pip represents the amount of one dollar for every ten thousand dollars being traded. One pip is equal to one US dollar for every ten thousand dollars being traded. In this example you are trading the US dollar against the Canadian dollar. The quote is 1.3455. If you were to buy 100,000 Canadian dollars you would profit ten dollars for every pip increase. If the quote changes from 1.3455 to 1.3459 there was an increase of four pips. This can also be measured and represented as an increase of 0.0004 but we use pips instead sinc.e their values can be calculated rapidly This helps traders make more efficient calculations on profit or loss in exchange rates. Profits and losses are calculated automatically and referred to as P&L for short. if you have a US trading account then your P&L will always be measured in US dollars. The same is true for trading accounts funded in Euros, British pounds, Japanese yen or any other forex currency the P&L is automatically translated to your trading account currency to make the calculation for profit or loss on each transaction simple to read. To learn more about how the foreign exchange market operates visit the education section on our website ForexTradingRoom.TV 4:38 The number one channel for forex market analysis. Thank you for watching our video "What is a PIP?" https://youtu.be/iBGpY89AoTE http://ForexTradingRoom.tv - a home to a Free Live Trading Sessions. http://ForexProAnalytics.com http://SmartForexTraders.com