Another day, another dollar. Let’s learn a bit more about PIPs and pairs. The most common currency trading are as follows: USD (U.S. dollar), JPY (Japanese Yen), GPB (Great British Pound), CAD (Canadian dollar), and EUR (Euro). Before we get ahead of ourselves, let’s talk about PIPs and what it is.
A PIP is an abbreviation for price interest point. PIP is a measurement tool that is used within currency pairs which correlates to the smallest price movement made by any change of the currency exchange rate. Most currency pairs, except JPY, are quoted to the fourth decimal position or one-hundredth of one percent. This means that smallest change in the currency pair would be the last figure. JPY denominated currency pairs are quoted to the second decimal position. A one PIP difference can equate to a consequential profit or loss, even though it is a small measurement unit. As an example, if we entered a trade for EUR/USD and we bought Euro for 1.1785 and exited the trade at 1.1853 we would have made 68 pips on the trade.
Some of the most well-known currency pairs among traders are EUR/USD, USD/JYP, GBP/USD, AUD/USD, USD/CAD, and NZD/USD. However, we always suggest starting off with just a couple of pairs until you truly understand and become a master of them.
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WRITTEN BY: Leslie Lazaro