Calculating pips is a practical skill that turns raw price movement into a number you can actually use to measure a trade’s performance. FXM680 walks through the calculation step by step, building on the concept covered in FXM680’s guide on what a pip is.
Table of Contents
Step 1: Identify the Pip Position for Your Pair
Most currency pairs measure a pip at the fourth decimal place, though pairs involving the Japanese Yen typically measure it at the second decimal place instead.
Confirming this position first prevents miscounting later steps, since applying the wrong decimal position leads directly to an incorrect result.
Step 2: Note the Entry and Exit Prices
Record the exact price at which you opened your position and the exact price at which you closed it, since both figures are needed for the calculation.
Even small rounding differences at this stage can distort the final pip count, so use the precise recorded prices rather than approximations.
Step 3: Find the Raw Price Difference
Subtract the entry price from the exit price to find the raw difference, keeping the result positive or negative depending on the direction of your trade.
For a long position, a positive difference reflects a gain, while for a short position, a negative difference reflects a gain, mirroring the mechanics covered in FXM680’s guide on long position vs short position.
Step 4: Convert the Difference Into Pips
Divide the raw price difference by the pip size identified in Step 1 to arrive at the total number of pips gained or lost on the trade.
This final figure is what most traders reference when discussing a trade’s outcome, since it standardizes performance across pairs with different pricing conventions.
| Step | Action |
|---|---|
| 1. Identify pip position | Fourth decimal for most pairs, second for Yen pairs |
| 2. Note entry and exit prices | Record precise figures for both |
| 3. Find raw difference | Exit price minus entry price |
| 4. Convert to pips | Divide the difference by the pip size |
Frequently Asked Questions
Why do Yen pairs calculate pips differently?
Yen pairs are quoted with fewer decimal places overall, so the pip position sits at the second decimal instead of the fourth.
Do I need to calculate pips manually while trading?
Most trading platforms calculate this automatically, though understanding the process helps you verify figures and interpret results confidently.
Does the pip calculation change based on position size?
The pip count itself stays the same, though the monetary value of each pip does depend on position size, a distinct concept covered elsewhere in the Forex Academy.
Disclaimer: The content provided on this page is for informational and educational purposes only. Trading financial markets involves significant risk. Consult with a certified financial advisor before making any investment decisions.
Forex Academy
Continue Your Forex Learning Journey with FXM680
Now that you can calculate pips, the next step is understanding what pip value actually means in monetary terms. Continue exploring the Forex Academy to keep learning.