If you trade with XM, you will not be able to read important information such as profit and loss and spreads unless you understand pips. Acquisition of knowledge about pips is essential for trading, so be sure to learn it.
What are pips?
A pip is the smallest unit or 1% of the currency being traded. The minimum unit of Japanese yen is 1 yen, so 1/100 of 1 yen, that is, 0.01 yen is equivalent to 1 pips. The smallest denomination of the US dollar is 1 cent ($0.01), not 1 dollar. The smallest unit of dollar is 1/10000 of 1 dollar, i.e. 1 pip is 0.0001 dollar
How much 1 pip will be depends on the currency as follows.
Japanese yen: 1 pip = 0.01 yen
Other than Japanese yen: 1 pip = 0.0001 currency
What is the profit and loss of XM pips? Japanese yen
Let’s see how to calculate how much XM’s pip profit and loss will be. The idea of the calculation method is that profit and loss can be calculated based on how much currency quantity was traded at 1 pip.
The profit and loss when trading 1 lot (100,000 currency) of USD/JPY (US dollar / Japanese yen) of XM is 100,000 currency x 0.01 yen = 1,000 yen, and profit and loss of 1,000 yen per 1 pips will occur.
If you trade 0.01 lot (1,000 currency), which is the minimum trading unit of XM, you will have a profit and loss of 10 yen per 1 pips.
Even if it is the same pips, the profit and loss of the trade will change as the currency volume of the trade is different.
What is the profit and loss of XM pips? Foreign currency
For currency pairs denominated in foreign currencies, even if you trade with the same currency volume, the rate of each currency is different, so the profit and loss per 1 pip of XM is different.
The profit and loss calculation method first needs to be “transaction currency quantity x 0.0001 x currency rate of each country”, and then it is necessary to obtain the amount equivalent to Japanese yen.
When trading EUR/USD (Euro/USD) in 1 lot at 1 EUR = 0.8 USD and 1 USD = 100 JPY,
100,000 currency x 0.0001 x $0.8 = $0.8, $0.8 x ¥100 to ¥80, profit and loss per pip is ¥80.
XM pip calculator tool
XM has a lot of useful tools. One of them is a tool that calculates pips, so please take advantage of it.
Pip value = Amount that moves when 1pips fluctuates. It means that if you hold 5 lots of dollar yen and change 1 pip, it will move 5,000 yen.
In addition to calculating pips, you can also use margin calculation and swap point calculation for free, so it is recommended for those who are weak in numbers.