When forex trading, pips are vital for day trading. So what are they? Price Interest Points or better known as pips are often encountered around day trading currencies. This is the representation of which the price of a particular currency is interpreted on its smallest fluctuation.
There are two kinds of forex trading pips; one is the static pip value and the other is the variable pip value. The static pip value is where other mayor currencies not including the US Dollar is being traded as the base currency. And the value is constant as relative to the Dollar. As per the variable pip value is where the US Dollar is the mayor currency or is the quote currency in the dominant base currency traded. For both pips, the key is always the most current exchange rate.
To be able to determine the forex trading pips, one must have to be able to compute the value based on the current exchange rate for the particular currency. The value of the pip entirely depends on the amount of the trade lot or contract. The most common size of a contract sold by forex brokers is about one hundred thousand units. In a static value pip, 1 pip would be equal to 0.0001 of the currency traded for which is the US Dollar.
To be able to get its value, one must first be able to determine the exchange rate of the mayor currency against the US Dollar then multiplied by the currency quoted by the fourth decimal place. On the other hand, the variable pip value one pip unit is equivalent to 1000 and is divided against the value of the exchange rate of the currency being traded for.