Friday, April 20, 2012

What is Forex Pip

PIP: Forex pip comes from shortened version of Percentage in Point. Forex pip is the smallest unit of price that is traded on a currency market.
Most of currencies are traded to four decimal points, so that a pip is 0.0001 or 1/10000 of a dollar. It seems like too little amount of money. but you can earn with forex at this level. Because you will sell and buy too much pips.

 (One exception of four decimal points is the Japanese Yen that traded with two decimal points)
The pip spread is very important. Because you take risk of immediate loss when you buy some currency. The value of the currency you buy must increase by the extent of the pip spread before you break even and the value must rise again to make a profit. Its easy to make profit on lover spreads. But remember that pip spreads are not guaranteed, pip spread can change quickly if forex market flustates.


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