A pip measures how much a price moves. Understanding how to calculate pips and their value helps you estimate profit or loss before opening a trade.
Lot sizes explained
Trading volume is measured in lots:
1 standard lot = 100,000 units
0.10 lot (mini) = 10,000 units
0.01 lot (micro) = 1,000 units
For most major Forex pairs:
1 pip = $10 when trading 1 standard lot
Calculating pips (price movement)
To calculate pips:
Subtract the opening price from the closing price
Example 1: EUR/USD
Open position: Buy 1 lot (100,000) EUR/USD at 1.29530
Close position: Sell 1 lot (100,000) EUR/USD at 1.29930
Calculation:
1.29930 − 1.29530 = 40 pips
Profit:
40 pips × $10 = $400
Example 2: GBP/USD
Open position: Buy 5 lots (500,000) GBP/USD at 1.52270
Close position: Sell 5 lots (500,000) GBP/USD at 1.52990
Calculation:
1.52990 − 1.52270 = 72 pips
Since 1 pip = $10 for 1 lot, for 5 lots, 1 pip = $50.
Profit:
72 pips × $50 = $3,600
Calculating pip value for JPY pairs
Example: USD/JPY at an exchange rate of 97.503
Formula:
"Pip Value"=(0.01/97.503)×100,000=$10.26" per pip"
Example
You buy 1 lot ($100,000) of USD/JPY at 97.503.
A few hours later, the price moves to 99.424, and you decide to close the trade.
Your new quote is:
99.424 / 99.450
Because you originally bought to enter the trade, you must sell to close it.
So, your closing price is 99.424.
Pip Difference
99.424-97.503=1.921" or " 192.1" pips"
Profit Calculation
Now we calculate the pip value at the closing price (more accurate):
(0.01/99.424)×100,000=$10.06" per pip"
Then:
192.1" pips"×$10.06=$1,932.53
Your trading platform calculates profit and loss automatically.
These calculations are useful for planning risk and position size before entering a trade.