What a pip is worth in money
What you learn in 3 minutesA pip is the smallest standard step in a price, usually the fourth decimal place for EUR/USD. What one pip is worth in money depends on two things: the size of the trade and the pair being traded. This lesson shows how to work out that value in shillings so the same twenty-pip move can be compared across different trade sizes.
One pip on 0.10 lots of EUR/USD
| Step | Amount | Note |
|---|---|---|
| Lot size | 0.10 lots | This is one tenth of a standard lot. A standard lot is 100,000 units of the base currency. |
| Units of EUR controlled | 10,000 | 0.10 multiplied by 100,000 units. |
| One pip in quote currency (USD) | USD 1.00 | 10,000 units multiplied by 0.0001, which is one pip. |
| GBP/KES reference rate used here | KSh 129.00 per USD | This rate varies between brokers and changes daily. It is used only to show the method. |
| One pip in shillings | KSh 129.00 | USD 1.00 multiplied by KSh 129.00 per USD. |
| Twenty pips in shillings | KSh 2,580.00 | KSh 129.00 multiplied by 20 pips. |
The broker may round the conversion rate, charge a spread, commission or swap on top, and the rate used for conversion can differ from the rate shown on a news site. Check the contract specifications for the exact pip value and any charges.
The mistake people make here
The common mistake is to think a pip has one fixed value in shillings. It does not. The value changes with lot size and with the pair, because the conversion rate between the quote currency and the shilling is not fixed. Instead of guessing, write down the lot size, the pip size for that pair, and the current conversion rate before placing a trade. Then multiply the three numbers to get the shilling value of one pip, and multiply again by the number of pips in the planned stop.Check yourself
On 0.10 lots of EUR/USD, one pip is USD 1.00. If the conversion rate is KSh 130.00 per USD, what is twenty pips worth in shillings?
One pip is KSh 130.00. Twenty pips is KSh 130.00 multiplied by 20, which equals KSh 2,600.00.
On 0.20 lots of EUR/USD, one pip is USD 2.00. At KSh 129.00 per USD, what is a fifty-pip move worth in shillings?
One pip is USD 2.00 multiplied by KSh 129.00, which equals KSh 258.00. Fifty pips is KSh 258.00 multiplied by 50, which equals KSh 12,900.00.
In Kenya
- Regulator
- The Capital Markets Authority (CMA) regulates investment firms in Kenya.
- Money
- The local currency is the Kenyan shilling, written KSh or KES.
- Funding methods
- Common ways to move money to a trading account include M-Pesa and bank transfer.
- Conversion
- A trade in EUR/USD is priced in US dollars. To see the value in shillings, the dollar figure is converted at a rate that varies between providers.
- Costs
- Spreads, commissions and conversion charges vary between brokers and are not set by the CMA.