Why should beginners use a pip calculator in trading?

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It helps you make informed decisions about where to enter and exit trades, and how much to risk on each trade

A pip is a unit of measurement for a currency pair’s value change in the foreign exchange market. Traders use pips to calculate their gains or losses. It is the smallest change in the exchange rate, usually the last decimal point. The value of a pip depends on the exchange rate and the trade amount. For instance, if a trader makes 10 pips on a trade, the cash amount gained will depend on the pip value, which can be calculated by dividing the trade amount by the exchange rate and multiplying it by the number of pips gained.

Using a pip calculator, you can quickly and easily determine the value of a pip in your account currency, which can help you make informed decisions about where to enter and exit trades and how much to risk on each trade. This information is critical if you are trading with leverage, as it can help you manage your risk and avoid potential losses.

Pip calculators have wide-ranging benefits for beginners. Let us go through each as follows.

Accurate pip calculations

You can accurately calculate the value of a pip for a currency pair, which is important for calculating profits and losses and making informed trading decisions.

Time saving

A pip calculator can quickly and easily calculate the value of a pip, saving traders time that they would otherwise spend on manual calculations.

Risk management

It can help traders manage their risk by determining the appropriate position size and stop loss for a trade.

Decisions

You can make more informed trading decisions, such as where to enter and exit trades.

Multi-currency support

Pip calculators can be customised to support different account currencies, making it easier for traders to calculate pip values in their preferred currency.

CompatibilityPip calculators can be used with different trading platforms and are available as standalone tools, making them accessible to traders regardless of their trading setup.

Free UsageMany pip calculators are free to use and can be found online, making them a cost-effective tool for traders.

To calculate the pip value, simply multiply/divide the found pip value by the exchange rate of your account currency and the currency being traded. If the currency being converted to is the counter currency of the exchange rate, divide the found pip value by the corresponding exchange rate ratio. If it’s the base currency, multiply the found pip value by the conversion exchange rate ratio. Most forex brokers will do this calculation automatically, but knowing how it works is still beneficial.

Here are some famous currency pairs and their value in pip:

The exchange rate between USD and CAD is 1 USD to 1.0500 CAD. The value of a pip (in terms of the base currency) is calculated by multiplying the value change in the counter currency by the exchange rate ratio. In this case, the value change is .0001 CAD, which, when divided by the exchange rate of 1.0500 CAD, gives a pip value of 0.000952381 USD per unit traded. 
A one-pip move in GBPJPY would be 0.01 JPY. By plugging this value into the formula [(0.01 JPY) / (150.00 JPY)] x 1 GBP, you get a pip value of 0.0000666 GBP. Therefore, for a trade of 10,000 units of GBP/JPY, each pip change in value would be equivalent to approximately 0.666 GBP.
The EUR/USD currency pair can experience a movement of one pip when it increases from 1.1700 to 1.1701. If you had opened a long position on EUR/USD and the market went up to 1.1740, you would have earned 40 pips and made a profit. However, if the market moved in the opposite direction, dropping from 1.1600 to 1.1560, your position would have suffered a loss due to a decline of 40 pips.

A pip calculator is a useful tool for beginners in trading as it helps calculate the value of a pip in a currency pair, which is important for managing risk, making informed trading decisions, and calculating profits and losses. Pip calculators save time and can be customised to support different account currencies. Different currency pairs have different pip values, and knowing the value of a pip can help traders make better trading decisions.