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Pips and ‘pips values’ represent one of the most misunderstood concepts in Forex trading. Newbies, especially, often have trouble grasping the idea behind pips — but, a solid understanding of pips is crucial In order to understand the lowest pip spread
If you’ve had trouble with pips, then today may be your lucky day. I’m going to attempt to clarify things once and for all with a brief pips tutorial.
Hopefully you’re already familiar with the concept of ‘basis points’. One basis point is equal to one one-hundredth of one percent, and represents the smallest increment of change measured for any financial instrument.
Take interest rates as an example. If the interest rate on your credit card rises from 10.12 percent to 10.13 percent, then it has risen by 1 basis point.
Pips are the Forex market’s version of basis points. Let’s say that the exchange rate for the EUR/USD pair move from 1.4465 to 1.4468. This movement represents a shift of 3 Pips, and may be good or bad depending on which currency you are holding considering The lowest pip spread .

Here’s the catch, though. Notice that the shift took place on the 4th decimal, which is the ten-thousandths place, or 1/10,000 of a percentage point? You have a shift of one ten-thousandth instead of one one-hundredth.
The reason for this is that most currencies (with the exception of the Yen) are quoted out to four decimal places. This means you get to take advantage of even the minutest shifts as you trade on high volume.

In order to calculate Pips for the common, four decimal currency pairs, you must divide the value of the lowest pip spread by the exchange rate:
1 Pip = 1/10000th / exchange rate
Now, what happens when you are dealing with the Japanese Yen? In this currency pair, we find an exception to the rule because the Yen is quote out only to the hundreds place, or 1/100.
For the USD/JPY pair (or vice versus), your formula would be:
1 Pip = 1/100th / exchange rate
Now that you know how to calculate Pips for any currency pair, you must look at what an actual Pip is worth to you in real dollar terms. This value is known as “pips value’. In order to do this, we must bring ‘lot size’ into the equation.
If you purchase a standard lot of 100,000 pairs of EUR/USD at 1.4465. , your formula will be as follows:

Pip Value = (0.0001 / 1.4465) x 100,000 = 6.91
So, a pip at this exchange rate is worth 6.91 Euro. Don’t look for exact numbers here. What you need to pay attention to is the fact that ‘6.91′ represents the average gain or loss per change in pips.
In other words, a fluctuation of 2 pip from 1.4465 to 1.4467 isn’t going to raise your profit or loss by a full Euro or more. Try doing the calculation for a 2 pip rise, and you’ll see that your pips value goes up only to 6.192.
I recommend getting comfortable with these basic calculations first, and then moving on to the calculations of actual profit and loss, which will require you to factor in bid price and ask price.
Also, remember that your online broker usually calculates pip and pips values for you, and you don’t have to know how to do the math. It’s just good business to be able to do it yourself.

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ForexGen | getting the lowest pip spread Just a trading game

To understand pips to know the lowest pip spread on the forex market you must understand how the market works. If you are new to forex trading there are many worthwhile, free offers and software online to help you learn ,the lowest pip spread and practise before risking your money.

Forex is an abbreviation of foreign exchange, the buying and selling of one foreign currency for another. As one currency strengthens so another weakens and knowing when to buy and sell is how money is made on the Forex markets. The Forex market is similar to the buying and selling of stocks but in many ways it is much more difficult. On the stock market you may spot a company that has potential, buy shares and hopefully make a profit, Gain the lowest pip spread but on the money market there may be long term trends where a currency strengthens and weakens, but much of the trading is based upon daily fluctuations that change by the minute.
A pip is the smallest unit of price that is traded for a currency. Most currencies are traded to four decimal points, so that a pip is 0.0001 or 1/100 of a cent. This may seem a minuscule amount until you realise that on a standard trade of $100,000 that is $10. The exception to the four decimal points is the Japanese yen which is normally traded to two decimal points.
Obviously if you are buying a currency you must also be selling another and therefore prices are always quoted in pairs, the USD/EUR being the most active. The more active a pair the narrower the difference between the bid/ask price is likely to be, with a possible spread of just two pips for the most actively traded.

Unlike the stock market there are no broker fees to pay, but as each trade involves both selling one currency and buying another, the difference in the spread is the cost of the transaction and must be taken into account when calculating profit. Therefore, as a buyer, the pip spread is very important to you. When you buy you have to accept an immediate loss. The value of the currency you have bought must rise by the extent of the pip spread before you break even and the value rise again to make a profit. The lowest pip spread the easier it is to make a profit.
Active markets tend to have the lowest pip spread, for example 2-3 pips. Currencies that are bought and sold less frequently may have a far higher spread. However, before you go to a broker offering the lowest pip spread, do check that they are reputable. You should also remember that pip spreads are not guaranteed, they can change if the market fluctuates widely

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