subject: A Guide To Forex Pips [print this page] Forex Pips: Is the word sounding like a Greek to your ears? Most of the people are not used to this term and it does sound odd. But in reality this word is only a term that is used to refer to anything, like a software or broker, to monitor your foreign trade business. Forex Pips is the short form for Foreign Exchange Price Interest Point. To simplify it further it means the minimum increase that a tender can have. It tells about the rate at which the trade is progressing in reference to the minimum cost. Pips in exact terms indicate the rate at which the value of foreign exchange is increasing or decreasing. Forex Price Interest Point is calculated in the form of percentages and is lot better than the other methods in the market.
When the value aspect of the Pips is concerned then it is equal to one over one hundred percent i.e. 1/100%. This helps in the sense that the businessmen will get to know about the point per point change in the market. This is similar to the minute by minute terminology that we normally use. If you want to determine the value of each pip then you can do that by noticing the money lost or gained for every Pip lost or gained. You can also calculate this by dividing the pip represented in the decimal form by the prevailing exchange rate.
But why do we need to use the Forex Pips? This is because of the fact that in the global trading there is no global currency. Although the US dollar is considered as reference point for most of the currencies but still you will find some instances where there is no US currency involved. So to come over this handicap, the Forex Pips is used as in this a bit of every currency is present.
