How to Calculate Pips in Forex

Summary

In 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.