Calculating forex price moves
Now that we are clear on what a pip is let’s see how much money we can gain or lose for each movement.
The size of your position will influence this, with the same price movement in pips, larger positions will have greater monetary consequences on your balance.
This can be calculated very simply: Positions size x 0.0001 = Monetary value of a pip
Here is a quick example using the EUR/USD as we have above:
We open a position size of 10,000 units and calculate the pip value as follows: 10,000 (units) x 0.0001 (one pip) = $1 per pip.
When you open a position of BUY and the market acts in your favor every pip movement will earn you $1.00 and the vice versa is true if you SELL. If the markets are against your choice to either buy or sell, a $1.00 will be lost per pip movement should the trend be against you.
Increasing or decreasing the amount of units will have the exact effect on the pip value.