Pip Values

Before someone points out the blatantly obvious to me, I thought I'd just bring this matter up. For the purposes of my updates, I've frequently used the pip value of USD10 per 100,000 standard lot. Anyone with even the most basic understanding of FX knows that whilst this applies to both GBP/USD and EUR/USD as USD-denominated major pairs... for USD/JPY (a USD-numerated major pair) and GBP/JPY (a currency cross belonging to a group termed "bastard step-children of forex" by babypips.com) it's quite different.

Calculating the pip value for a cross where the USD is the numerator is pretty easy:
pip value = (pip * lot size) / rate.

** Note that a pip is usually going to be 0.0001 or 0.01 if you're trading a JPY cross.

For GBP/JPY, since the denominator has a USD cross rate where the USD is the NUMERATOR, then the pip value simply equals the pip value of the USD cross rate. So, in this particular case, the GBP/JPY pip value = the USD/JPY pip value.

So, if USD/JPY is at 96.30, the pip value for both USD/JPY and GBP/JPY is therefore USD10.38 per pip ((0.01 * 100,000) / 96.30).

For the purposes of brevity, I've simply used USD10 per pip. I hope everyone understands.


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