Are these $/pip values correct?

ForexWindo · #1 (**permalink**) 03-26-2008, 01:46 AM

Hi,

Forex trading is new to me and I am trying to ensure I understand the calculations involved. I installed FXCM Trading Station and have been using the practice/demo account.

It shows EUR/USD exchange rates of 1.57265 and 1.57304 right now.

The account is trading $100k lots.

This would make each pip worth $1, correct?

The program shows pip cost to be $10.

Most web sites that I look at calculate pip using an exchange rate that has 4 decimal places yet these have 5. If it was using a 4 decimal place exchange rate, the pip cost would be $10....

Am I missing something fundamental here?

Thanks,

Forexwindo

Analytic-Eye · #2 (**permalink**) 03-26-2008, 01:53 PM

hi,

yes $10 is correct if you are trading $100k lots (if you consider that 1 pip is 0.0001). just do the maths.

regarding the quotation with 5 decimal places i have to say that i have seen it already in some trading platforms but it is not very common for online-brokers (most common in inter-banking trades).

rgds,

ForexWindo · #3 (**permalink**) 03-26-2008, 05:29 PM

Thanks analytic-eye,

It's a bit misleading that pip is defined as the smallest upward or downward price movement just about everywhere that I read it. To make matters worse, some definitions made the point that if the exchange rate was 123.45 then one pip would be the hundredth place.

Thanks again for clearing things up.