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Forex Trading Profit and Loss Calculations

The online forex software calculates profit and loss for every position on a continuous basis, allowing FX traders to track their gains and losses in real time as the prices in the market change. In this section, a table is provided to give traders an ideal of the dollar value for the major pairs.

"Pip" stands for "price interest point" in the forex market, and it represents the smallest fluctuation in price for a given currency pair. For most currencies the exchange rate (price quote) is carried out to the fourth decimal place. In this case, a pip is 1/10,000th of the counter currency or 0.0001. Fore example, if the Ask price on the EUR/USD is 1.1465 and it goes up 1 pip, the resulting price will be 1.1466. Some exchange rates, like USD/JPY, are only carried out to two decimal points. Fore these pairs, a pip is worth 1/100th of the counter currency.

The table below is for reference purposes only. You don't have to memorize the values show, since they are calculated automatically by the FX trading software. The currency pairs where the USD is the quote currency have a "static" pip value for accounts based in U.S. Dollars. This means that each pip is worth US$10 per standard lot and US$1 per mini contract. The pairs that have the USD as the base currency, on the other hand, have a variable pip value. This means that for dollar-based accounts, the value of each pip fluctuates as the exchange rate fluctuates (pairs with variable pip values are highlighted in red in the table below).

Approximate USD Value for a 1 "pip" Move
(for mini accounts, divide the Value by 10)

Currency	1 pip	Contract Size	Exchange Rate*	Value (1 pip)
EUR/USD	0.0001	100,000 EUR	1.1292	US$10.00
GPB/USD	0.0001	100,000 GPB	1.6319	US$10.00
USD/JPY	0.01	100,000 USD	103.81	US$9.63
USD/CHF	0.0001	100,000 USD	1.1342	US$8.82
AUD/USD	0.0001	100,000 AUD	0.6580	US$10.00
USD/CAD	0.0001	100,000 USD	1.2102	US$8.26

*Exchange rates from 12/29/04

Static pip value example:
EUR/USD (using values above) 1 pip = 100,000 EUR x 0.0001 USD / EUR = US$10.00

As you can see, it is quite easy to determine the value of a pip in terms of dollars when the USD is the quote currency. On the other hand, when the USD is the base currency, there is an extra step involved to convert the pip value into dollars. This is done by dividing by the current exchange rate. See the example below:

Variable pip value example:
USD/JPY (using values above) 1 pip = 100,000 USD x 0.01 JPY / USD = 1000 JPY / 103.81 JPY/USD = US$9.63

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