When people first begin to get involved with Forex they often have a difficult time learning about all of the appropriate terminology and industry jargon. Forex futures, options, forex hedging, spot, etc. etc. these are all terms that a beginning trader must get a hold of before they can truly start to feel comfortable while trading currency.
One of the terms that consistently provides people with an enormous amount of stress and uncertainty is the forex pip, and how forex pips are used in currency trading. The truth about forex pips is that they are not that difficult to understand at all, and if you want to fully understand what a forex pip is you simply need to learn about the definition itself and then perhaps study some examples.
A forex pip, or percentage in point, is the fundamental unit of measurement that describes the value of a particular currency pair. Most currency pairs exhibit a pip that is at 0.0001, and the best way to see this exactly is via the use of an example. For instance, if you were trading EUR/USD at 2.8455 and you sold it at 2.8460 you just made five pips. It is really that simple, and while the actual term can be intimidating at first, in really it is nothing to stress out over. If you want to get the real value of the pip then you just have to divide 0.0001 by the exchange rate, as this will give you a very small number and you shouldn't be worried as this is what is supposed to happen.
Once you have a firm grasp of forex pips you should not have to keep going back to review the definition as it is similar to learning how to ride a bike, once you know how to do it the right way, it should be with you forever.
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