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.

Outlines

00:00

🧑‍🏫 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.

05:01

📊 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.

Keywords

💡Pip

A pip is the smallest price movement in the exchange rate of a currency pair. In the context of the video, it is the basic unit of movement that traders watch for to determine the profitability of their trades. For example, the script explains that a move from 1.1922 to 1.1927 in the EUR/USD currency pair is a one pip increase.

💡Forex

Forex, short for foreign exchange, is the global marketplace for trading currencies. The video discusses how to calculate pips in the forex market, which is essential for day traders to understand profit and loss in currency trading. The script uses the EUR/USD pair as an example to illustrate pip movement.

💡Cryptocurrencies

Cryptocurrencies are digital or virtual currencies that use cryptography for security. The video mentions that calculating pips applies to cryptocurrencies as well, and traders need to be aware of the larger pip movements that can occur in this highly volatile market, as seen with the Bitcoin to USD example.

💡Indices

Indices are statistical measures of the changes in a portfolio of stocks representing a portion of the overall market. The script warns that indices can have large pip movements, which can be significantly more than forex, affecting the risk and potential reward for day traders.

💡Day Trading

Day trading is the practice of buying and selling financial instruments within the same trading day. The video is aimed at day traders, providing tools and knowledge to calculate pips and understand market movements for more informed trading decisions.

💡Moving Average

The moving average is a technical analysis tool used to smooth out price data and highlight trends. Although not directly mentioned in the context of pip calculation, it is part of the channel's theme where the video is discussed, implying its use in day trading strategies.

💡Measuring Tool

The measuring tool, as described in the video, is a feature on trading platforms like TradingView that allows traders to visually measure the distance in pips between two points on a chart. It is used to estimate pip movements and understand the scale of market changes.

💡Lot Size

Lot size refers to the amount of a currency being traded in a single transaction. The video explains different lot sizes such as standard, mini, and micro lots, and advises new traders to start with smaller sizes to manage risk effectively.

💡Live Charts

Live Charts is a website mentioned in the video that displays the strength of major currency pairs in real-time. It helps traders evaluate market conditions and sentiment, which is crucial for making informed trading decisions.

💡Investing.com

Investing.com is another resource cited in the video that provides information on forex currency pairs and market sentiment across different time frames. It is used to gauge the overall market direction and the strength of potential trades.

💡Demo Trading Account

A demo trading account is a practice account that allows traders to simulate trades without risking real money. The video suggests starting with a demo account to familiarize oneself with pip calculations and trading strategies in a risk-free environment.

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