You may of heard traders discussing the amount of pips or points they have made or lost in a days trading. A pip, or point is simply the increment that forex traders use to determine how much a currency pair has moved, as we are not trading in whole numbers and often only a tenth of the smallest currency denomination e.g. a tenth of a cent it is easier to describe these denominations as a pip or point.
The forex market is traded in set trading pairs the first symbol of that pair will represent the whole being valued against the changing second pair. The most common currency pair traded is the GBP/USD ( British Pound V’s U.S. Dollar) When reading the price on this currency pair it will give you what the value of the Dollar currently is against 1 British Pound, E.g. 16000 or $1.60.
Note the price is given with two extra zeros; this is the initial quantity of that currency pair that we would be trading also known as pips or points. If the price changed from 16000 to 16010 then this would indicate that the price has increased by 10 pips or a tenth of a cent.
It is this shift in price that forex traders make there money or pips. It depends on how much you bet per pip or point to how much money you’ve made. If I was to bet at 10 GBP a pip then this 10 pip shift would see me be in 100 GBP profit even though the currency has in fact only shifted a tenth of a cent.
Pips are very often the topic of conversation in forex forums how much you bet per pip is for your eyes only which is why people never disclose how much money they have one or lost just the amount of pips the have lost or gained.
