How to Calculate Pips in Forex
Summary
TLDRIn this informative video, Artie introduces four essential tools for day traders to calculate pips across various financial instruments, including forex, cryptocurrencies, and indices. He demonstrates how to use the measuring tool on TradingView to visualize pip movements and explains the concept of pips in different currency pairs like EUR/USD and GBP/JPY. Artie also discusses the significance of lot sizes, offering advice for beginners to start with micro lots and stick to forex trading. Additionally, he recommends three websites for evaluating currency strength and market sentiment, emphasizing the importance of demo trading to familiarize oneself with pip calculations and trading strategies.
Takeaways
- 📈 Forex and cryptocurrency pip counts differ significantly and need specific tools to measure accurately.
- 🛠️ The measuring tool in TradingView is essential for day traders to calculate pips quickly and accurately.
- 💡 For EUR/USD, moving the decimal point four places from the current price helps calculate pips.
- 🔍 GBP/JPY also requires moving the decimal point four places to calculate pips.
- ⚖️ Cryptocurrency pairs, like Bitcoin/USD, involve significantly more pips compared to forex pairs.
- 💵 Trading indices and cryptocurrencies can result in substantial gains or losses, making them riskier for small accounts.
- 🔢 Understanding lot sizes (micro, mini, and standard) is crucial for managing risk in day trading.
- 🌐 Using free online tools to calculate pip amounts, lot sizes, and potential profits can enhance trading efficiency.
- 📊 Live charts can help traders evaluate currency strengths and weaknesses in real-time.
- 📈 Investing.com provides market sentiment indicators for major forex pairs across different time frames, aiding in decision-making.
Q & A
What is the main topic of the video?
-The main topic of the video is teaching new day traders how to calculate pips on different currencies, including forex, cryptocurrencies, and indices, and introducing four tools to assist with day trading.
What is a pip in the context of forex trading?
-A pip is the smallest price movement in the forex market, typically the fourth decimal place for most currency pairs, and it represents the basic unit of price change for currency pairs.
How is the pip value calculated for the Euro/USD (EUR/USD) pair?
-For the EUR/USD pair, the pip value is calculated from the fourth decimal place. For example, if the price moves from 1.1926 to 1.1927, that's a one pip up movement.
What tool can be used to measure pips on trading charts?
-The measuring tool, which resembles a ruler and can be found on the left-hand side of TradingView, can be used to measure pips on trading charts.
How does the pip value differ between the GBP/JPY pair and the EUR/USD pair?
-The pip value for the GBP/JPY pair is calculated differently as it is a currency pair involving yen, which has a lower value compared to the USD. The pip is the second decimal place instead of the fourth.
What is the significance of the measuring tool in understanding pip movements?
-The measuring tool helps traders visualize the pip movements within a specific time range, providing a clear representation of how much the price has moved in pips.
Why should traders be cautious when trading cryptocurrencies like Bitcoin?
-Traders should be cautious with cryptocurrencies because the pip movements can be much larger compared to forex, leading to significant gains or losses, especially for those trading with small accounts.
What are the three different measures of lots mentioned in the video?
-The three different measures of lots are 0.01 (micro lot), 0.10 (mini lot), and 1.00 (standard lot), which represent the size of the trade in terms of currency units.
What are the additional tools mentioned in the video that can help evaluate currency strength?
-The additional tools mentioned are Live Charts, which shows the strength of major currency pairs at a given time, and Investing.com, which provides market sentiment for different time frames.
What is the advice given for new traders regarding lot sizes and types of trading?
-The advice for new traders is to start with micro lots and stick to forex trading only until they are comfortable with the pip count and lot sizes, and to use a demo trading account to practice.
What is the purpose of the pip calculator tool mentioned in the video?
-The pip calculator tool is used to determine the profit or loss a trader would make based on the pip amount, currency pair, trade size in lots, and the base deposit currency.
Outlines
🧑🏫 Introduction to Calculating Pips for Day Traders
This paragraph introduces the topic of calculating pips for various trading instruments like forex, cryptocurrencies, and indices. It highlights the importance of understanding pips for day trading and mentions that the video will cover four essential tools for day traders.
📊 Understanding Pip Calculation in Forex (EUR/USD Example)
This section explains how to calculate pips using the EUR/USD currency pair. It describes the concept of pips and how to count them using the decimal points in currency prices. An example using the current price of EUR/USD illustrates how to determine pip movements.
📉 Pip Calculation for GBP/JPY
This paragraph explains pip calculation for the GBP/JPY currency pair, showing how different currency pairs have different pip values. The method of counting pips by moving decimal points is demonstrated with an example, followed by a practical application using a measuring tool.
💹 Measuring Pips in Cryptocurrencies and Indices
This section contrasts pip calculation in forex with cryptocurrencies and indices. It emphasizes that price movements in cryptocurrencies and indices are much larger, making them unsuitable for small accounts. Examples with Bitcoin and US30 illustrate these larger pip movements.
🔢 Lot Sizes and Their Impact on Trading
This paragraph introduces different lot sizes (standard, mini, micro) and advises new traders to start with micro lots to minimize risk. It emphasizes the importance of understanding lot sizes in managing trading risks and avoiding significant losses.
🛠️ Tool 1: Pip and Lot Size Calculator
This section introduces the first tool, a pip and lot size calculator, which helps traders determine potential profits based on pip movements, currency pairs, trade sizes, and base currencies. An example calculation illustrates its practical use.
📈 Tool 2: Live Charts for Currency Strength
This paragraph describes the second tool, Live Charts, which shows the strength of major currency pairs in real-time. It helps traders identify strong and weak currencies, aiding in making informed trading decisions based on current market conditions.
📉 Tool 3: Market Sentiment on Investing.com
The third tool, available on Investing.com, provides market sentiment data for major forex currency pairs across different time frames. It indicates whether the market sentiment is a strong buy or sell, assisting traders in evaluating potential trades.
💼 Starting with a Demo Account
This section advises new traders to begin with a demo trading account. It allows them to experiment with different lot sizes, values, and balance deposits without financial risk. This practice helps traders get comfortable with pip calculations and trading strategies.
👍 Conclusion and Call to Action
The final paragraph encourages viewers to like the video and subscribe to the channel for more trading tips. It reinforces the value of the discussed tools in improving day trading skills and managing risks effectively.
Mindmap
Keywords
💡Pip
💡Forex
💡Cryptocurrencies
💡Indices
💡Day Trading
💡Moving Average
💡Measuring Tool
💡Lot Size
💡Live Charts
💡Investing.com
💡Demo Trading Account
Highlights
Introduction to a new tool for day traders to calculate pips on various currencies and indices.
Explanation of how to count pips in the EUR/USD currency pair, starting from the fourth decimal place.
Demonstration of using the measuring tool on TradingView to visualize pips in the EUR/USD pair.
Difference in pip calculation for the GBP/JPY currency pair, with the pip value changing based on the pair's price.
Use of the measuring tool to show the visual representation of 10 pips in the GBP/JPY pair.
Clarification on pip movement for cryptocurrencies like Bitcoin, emphasizing the larger pip values compared to forex.
Highlighting the risks of trading indices, cryptocurrencies, and gold due to their high pip movements.
Introduction to different lot sizes: standard, mini, and micro lots, and advice for beginners to start with micro lots.
Recommendation of websites to calculate pip amounts and lot sizes for profit assessment.
Description of using Live Charts to evaluate currency strength and market direction.
Mention of Investing.com for gauging market sentiment on different time frames for forex pairs.
Emphasis on using the measuring tool on TradingView for a clear understanding of profit and loss potential.
Suggestion to start with a demo trading account to familiarize oneself with different lot sizes and values.
Encouragement for viewers to like and subscribe for more day trading insights and tools.
The importance of understanding pip count on each currency pair for effective day trading.
Transcripts
so you're a new day trader and you want
to learn how to calculate
pips on different currencies whether
it's forex whether it's cryptocurrencies
or
indices in this video i'm going to show
you four amazing tools that you should
use on a daily basis to help you with
your day trading
welcome back to the channel everybody my
name is artie and this is the moving
average a show where we discuss
everything day trading to keep you
profitable on a consistent basis
okay so pip count on different
currencies and different pairs and
different indices
they're completely it's just a weird
thing they work differently
let's jump into the charts i'm going to
show you exactly what i'm talking about
so we're looking at euro usd right here
the current price is 1.1922
six nine so that means for every
one euro you will get 1.19269
us dollars okay so at this decimal point
that is where you start counting back
four places
so one two three four
if this number goes up or down
one digit so this goes to two seven
instead of 2
6 that is one pip up
so if this price went to 1.19369
that would be a difference of 10
pips now let me show you what 10 pips
looks like
on euro usd using our measuring tool
on the left hand side this right here
this small amount of space is 10 pips
now that's the first tool that we're
going to talk about on the left hand
side
of trading view there is an icon that
looks like a ruler
it is your measuring tool you can also
click
shift and then click and drag it out and
this is your measuring
tool it will show you how many pips in a
specific time range you're looking at
now when looking at a different currency
pair
gbp jpy so british pound and japanese
yen
you can see that the price is completely
different and it is 151.306
so if you just want to do this in your
head really quick you would just move
this decimal point to right here
and then count back four places so after
the first
digit this would be one two
three four and just to clarify so for
one british pound you would get 151.306
yen
so if this price right here goes to
three
one that's one pip so for example
say it goes to four zero six
that would be one two three four places
these two numbers you're looking at 10
pips
on gbp jpy now let's take the measuring
tool and see what 10 pips
looks like on here again a very very
small section getting 10 pips in the
market is quite
easy and it happens very fast now
instead of doing all of this math and
looking at the fourth decimal point
say you're looking at bitcoin us dollar
you just take your measuring tool
and you're getting a lot more pips than
you would in forex
so say this one candle right here is 22
968 pips which is a price difference of
229 dollars
which is why most people with small
accounts trading point
zero one lot sizes should not do
indices or cryptocurrencies or gold for
that matter
a one dollar move in indices and
cryptocurrencies
is substantially more if not a hundred
times more
than a move in forex same goes with
indices
like us 30 you take your measuring tool
and this one candle right here
was 946 pips so when you're calculating
lot sizes there are
three different measures of lots you
have
0.01 0.10
and 1.00 this is called a standard lot
this is called a mini lot and this is
called a micro lot
if you're new and you're trading real
money stick with this one
before you start going crazy with these
bigger numbers
and you'll actually have a more
comfortable time
trading because even if you lose it
won't be that much money but try to
stick to forex only so the other three
tools that i want to show you really
quick
so all of these websites are free and
they will be linked down below in this
video
but the first one is going to calculate
pip amount
and the lot size to show you how much
profit you would make on that so you
would type in the pip amount right here
the currency pair that you're trading
the trade size
in lots that you're trading and the base
deposit currency
for me it's usd so with the 20 pip move
on a 0.1
lot size i'm looking at a 20 profit and
as you can see every single currency
pair is on here and you can do any trade
size that you want this calculator is
amazing now the other two things that
you can use they're not really in
accordance with
measuring pips but they will help you in
your evaluation
of which currency is stronger or weaker
than the other one
so this website is called live charts it
shows you all of the major currency
pairs and their strength at that time
in correspondence with others so as you
can see right here jpy is very strong
and gbp is very weak giving you an
indication of where the price is going
to go
the other one is on investing.com it
shows you the major forex currency pairs
right here
and on which time frame the five minute
the 15 minute the hourly and the daily
it tells you what the market sentiment
is whether it's a strong
sell or a strong buy so using these
three websites as well as the measuring
tool
on training view is going to give you a
clear indication
of how much profit and loss you're
willing to make or potentially gain
in your day trading journey i always
suggest starting with a demo trading
account
that way you can play around with
different lot sizes different values
different deposits as your main balance
for
your day trading journey and this way
you can test it out see what works for
you see what you're comfortable with
and that way you get to know the pip
count on each currency pair if you guys
enjoyed this video and got some value
out of it don't forget to leave a like
and subscribe on your way out and we
will see you
in the next video
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