Understanding pip or point value is essential in forex trading, as it plays a pivotal role in managing your risk and estimating your potential gains or losses.
What Are Points, Pips, and Pipettes?
In trading, Points, Pips, and Pipettes are essential terms used to measure price movements in various markets, such as forex, commodities, indices, and crypto. These terms help traders assess and communicate the extent of price changes with precision, ensuring a clear understanding of market fluctuations.
1. Point
A Point refers to a full unit change in price. This is typically used for larger price movements, particularly in commodities and indices.
Example for US30:
If the price of US30 moves from 35,000.10 to 35,001.10, the change is 1 point. This is a 1-point move, representing a full unit shift in value.
2. Pip
A pip stands for "percentage in point" and is the standard unit for measuring price movements in most currency pairs. A pip represents the smallest price movement that an asset can make in the market.
Example for EURUSD:
If the price of the EURUSD pair moves from 1.10000 to 1.10010, it has moved by 1 pip. For most currency pairs like EURUSD, a pip is equal to a 0.0001 price movement.
Example for USDJPY:
For the USDJPY pair, a pip represents a 0.01 change. So, if the price moves from 110.101 to 110.111, that’s a 1-pip movement.
3. Pipette
A pipette is one-tenth of a pip and allows for even more precise measurements of price movements, which is especially useful for high-frequency or low-volatility assets.
Example for EURUSD:
A pipette would be a 0.00001 change in price. For example, if the EURUSD pair moves from 1.10001 to 1.10002, that’s a 1-pipette move.
Example for USDJPY:
In the USDJPY pair, a pipette represents a 0.001 change in price. A move from 110.101 to 110.102 is a 1-pipette movement.
The value of a pip or a point isn't static; it changes depending on the currency pair, commodities, and indices you're trading. Below, you will find a comprehensive chart detailing the pip or point value for all forex instruments, calculated based on 1 standard lot size, to guide you through this essential aspect.
How do I calculate the potential profit or loss for my trades in FundedNext?
To determine the profit or loss for a particular currency pair, commodities, indices, and cryptocurrencies, use the following formula:
Profit/Loss = Pip/Point Difference x Lot Size x Pip Value.
Example 1: Buying 1 lot EURUSD
Open Price: 1.09220
Close Price: 1.09320
Lot Size: 1 lot
Pip Difference: 10 Pips or 100 Pippetes
Profit/loss = (10 Pips x 1 Lot x $10.00) = +$100.00
Outcome: As the trader initiated a buy trade on EURUSD at an opening price of 1.09220 and closed the trade at 1.09320, the pip difference for the trade was 10 pips. In this instance, the trader would gain a profit of +$100.00 from this specific trade.
Example 2: Buying 1 lot XAUUSD
Open Price: 1892.00
Close Price: 1892.70
Lot Size: 1 lot
Pip Difference: 7 Pips or 70 Pippetes
Profit/loss = (7 Pips x 1 Lot x $10.00) = +$70.00
Outcome: As the trader initiated a buy trade on XAUUSD at an opening price of 1892.00 and closed the trade at 1892.70, the pip difference for the trade was 7 pips. In this instance, the trader would gain a profit of +$70.00 from this specific trade.
Example 3: Selling 1 lot US30
Open Price: 34567.10
Close Price: 34562.10
Lot Size: 1 lot
Point Difference: 5 Points or 50 Pips
Profit/loss = (5 Points x 1 Lot x $10.00) = +$50.00
Outcome: As the trader initiated a sell trade on US30 at an opening price of 34567.10 and closed the trade at 34562.10, the point difference for the trade was 5 points. In this instance, the trader would gain a profit of +$50.00 from this specific trade.
Example 4: Selling 1 lot BTCUSD
Open Price: 52206.10
Close Price: 52203.10
Lot Size: 1 lot
Point Difference: 30 Pips
Profit/loss = (30 Pips x 1 Lot x $0.10) = +$3.00
Outcome: As the trader initiated a sell trade on BTCUSD at an opening price of 52206.10 and closed the trade at 52203.10, the pip difference for the trade was 30 pips. In this instance, the trader would gain a profit of +$3.00 from this specific trade.
Example 5:
May 2025: Selling 1 lot AUDCAD
Open Price: 0.90000
Close Price: 0.89200
Lot Size: 1 lot
Point Difference: 80 Pips
Profit/loss = (80 Pips x 1 Lot x $7.14) = +$571.20
Outcome: With an 80-pip move on AUDCAD in May 2025, where the pip value was $7.14, the trade returned a profit of $571.20.
August 2025: Selling 1 lot AUDCAD
Open Price: 0.90000
Close Price: 0.89200
Lot Size: 1 lot
Point Difference: 80 Pips
Profit/loss = (80 Pips x 1 Lot x $7.28) = +$582.40
Outcome: In August 2025, the identical 80-pip move yielded $582.40 because the pip value is $7.28, showing how changes in pip value over time alter P&L even when the pip distance is the same.
These examples are designed to provide a clear understanding of how pip values or point values impact your trading outcomes. Remember, the key to successful trading lies not just in understanding these calculations but also in applying them effectively to your trading strategy. Please also note that for some instruments, pip values can differ slightly depending on the conversion rate.