Do you know how to calculate pips in Forex, pips you have already made or number of pips you need for your stop loss and take profit targets?
Or are you among the many that calculate their loss and profits in monetary terms instead of in pips?
I use to be like you and because I was measuring my trading wins and losses in monetary terms instead of in pips I was blinded to the progress I was making on a general basis as a trader.
Let me explain.
Imagine that you are trading a small lot size of 0.01 because you have a small Forex account.
And the trade goes on to make $2 minutes or hours afters placing it. You are bound to look at the $2 like NOTHING!
And in many cases, as a trader you would not see the need to take profit because $2 is small money.
And therein lies the evil of measuring your Forex journey in how much cash you have made instead of how many pips you made.
Let’s say a certain amount of pips was responsible for the $2 profits (by the way, this is for example purpose, thus the calculation is not meant to be accurate). Let’s say 70 pips is what became $2 dollars in monetary terms.
If the trader was measuring his profits in pips, he would be mightily excited that he is able to catch 70 pips for the day.
Many professional traders would kill for that amount of pips but I was ignorant of this fact, at the beginning.
Because I had a small Forex account and the 0.01 lot sizes were just fetching few dollars.
I really did not see that as a young trader I was already ripe enough for the big leagues.
I was making that $2 and sometimes $4 profits on a consistent basis and I still didn’t see the profits as anything.
Not until I started watching YouTube videos of guys making money in Forex with just 20 to 30 pips a day profit Target.
Some of them even had lower pips profit daily target and yet they were making money in dollars and in thousand’s.
Then it clicked!
They were using big Forex accounts, which was allowing them use big lot sizes without fear of blowing up their accounts.
That was when I decided to trade with a 0.10 lot size and it was a pleasing discovery, that I also could make $20 profits and above on any given day.
It changed my mindset and these days I rarely even scalp the market anymore. I just enter my trade on a daily time frame and patiently wait for that pip movement within the daily candle to touch my pip profit target for the day.
As a trader you must learn to see the market in pips. Both your losses and wins take on a more clearer form when you measure them in pips.
If you catch just 50 pips in a day. You are already a successful trader if you can make it a consistent trading outcome whenever you open up your charts for trades.
The factor that really brings out the value of the amount of pips you make is tied to the lot size you are using.
Following the above example.
A trader that makes 70 pips with a 0.01 lot size makes just $2.
A trader that makes the same amount of pips but uses a 0.10 lot size makes $20 as profits.
While another trader with a 0.20 lot size would make $40.
The problem with the small trader is his small Forex account.
The second major problem is that he is measuring his profits in monetary terms instead of in pips.
Which blinds him to the fact that he is really making progress.
This post will teach you how to calculate pips in Forex.
And once you can make the calculation yourself, I would advice that you start using pips for loss and profit targets.
Like in a previous post I made on how to overcome fear and greed in trading, I hinted that patience is one of the most effective tips to combating greed while trading Forex.
You will find it hard to be patient when you count your loss and wins in momentary term. Especially when you have a small account and thus, trades only small lot sizes.
But when you make your measurements in pips, you begin to appreciate your wins even when they come in few dollars.
When you measure your profits in pips, you would begin to find it easy to take profit. You no longer see just $2, you see 70 pips.
You see your Forex strategy actually working, from 1 to 70 pips. You appreciate the slow incremental progress that gave you that 70 pips for the day.
Others are making way less than that, but because their account is big, they make bigger profits.
The same profits that awaits you when you start trading with a bigger account.
How To Calculate Pips In Forex
How to calculate pips in Forex that you have made is quite simple. Assuming you buy the Eur/GBP currency pair at 0.84014 and sell it at 0.85373.
To get the number of pips made, you would have to minus one price from the other.
Something like this.
0.85373 – 0.84014 = 0.01359
You would have made a 135.9 pips!
It is simple right?
But there is another way that explains the calculation more. Let’s check that out.
For 4-decimal currency pairs, use (X.XXXX – Y.YYYY) × 10,000
For yen pairs use (XX.XX – YY.YY) × 100
From our above example, using this new method, the calculation would become (0.85373 – 0.84014) × 10,000 = 135.9 pips
The first example gives you 0.01359 and you have to do the final placement yourself but with the second method it comes out in its final form.
So there you have it, that is how you calculate pips in Forex that you have made.
Calculating Pips For Take Profit
Now that we are done with how to calculate pips in Forex that you have made or lost with a given trade, let us discuss how to calculate take profit with pips.
Let’s say you enter a trade at 0.85373, and you want to set you take profit at 50 pips.
This is how you calculate it.
0.85373 + 0.0050
That would be your take profit level. You simply input 0.85873 as your take profit target and once price touches that level, you make 50 pips.
Calculating Pips For Stop Loss
Using the above example. All you have to do is to subtract the amount of pips from your entry price.
0.85373 – 0.0050
0.84873 would become your stop loss level. When price goes against you by 50 pips, your stop loss would exit your trade making sure the loss does not exit 50 pips.
How To Calculate Pips In Forex Using Cross Hair
But there is another very simple method. All you have to do is use the cross hair tool on your mt4 on desktop or your mt5 on mobile.
You simply activate the Cross hair tool, press and drag it from one candle to the other to measure pips.
I will be providing you with a video that can help you use the cross hair tool on your mt5 mobile app.