How to know how much a “pip” is worth for any pair!

Many times, newer traders ask me how they can find out how much a “pip” is worth for any pair. Some will refer to these as pip “costs”, others will say pip “values”, etc. but it’s all the same thing.

They all want to know, if my pair moves up one increment or down one increment…how many dollars does that equate to?

Here’s the simple answer. It’s automatically calculated for you on your trading station. You can view this on the “Advanced rates” which is the default setting..OR…you can view it on the Simple rates” tab.

See both of them below.

I’ve circled (in each format) where to find the pip cost/value for a pair. Notice that any pair that ends in USD (ex. EUR/USD, GBP/USD, NZD/USD, etc.) all have pip values of $1.00 per standard mini lot. Had this been a micro account, then the pip value would be 10 times less or .10 (10 cents) per pip of movement (since a micro lot is ten times smaller than a standard mini lot).

Remember, that a standard mini lot = 10,000 units of currency and a micro lot = 1,000 units of currency.

So the pairs that end in something other than USD (ex. EUR/CHF, USD/JPY, EUR/AUD, etc.) will have pip values that change slightly over long periods of time.

However, you can easily see what a “pip” is worth in that pair BEFORE you place your trade since it’s conveniently located on your quote screen.

This is important to note because there’s a big difference in EUR/GBP’s pip value of $1.66 and EUR/AUD’s pip value of .84 (84 cents).

So one pip of movement for or against you in EUR/GBP is +/-$1.66. However, in EUR/AUD this same amount of movement is +/-$0.84 (big difference, dollar wise…yet the same amount of pips moved). Click on the charts to enlarge them.

Sean Hyman

P.S. - Want to learn more about fundamentals and technicals? Sign up for an inexpensive, only forex course today and we’ll show you how: http://www.mywealth.com/currency-trading.php

Also, get a free, real time demo trading station here: http://www.fxedu.com/practice-forex-account

It appears the Swiss keep “raising the floor” on the EUR/CHF trade!

Okay, I realize that this isn’t the only pair out there. However, it is likely the ideal candidate right now as it likely has much more upside potential than downside due to the constant intervening of the SNB - Swiss National Bank (Switzerland’s central bank).

Also, keep in mind, the trend is now upward recently…and no longer downward. Being that the EUR/CHF is one of the more widely watched/traded pairs by institutions (which produce such enormous volume for a “cross pair”), it won’t be long before their automated “trend following” programs kick in and aid the central bank’s efforts.

And…it appears that the SNB keeps going into the market and selling francs “sooner and sooner” all the time. See how it continues to “raise the floor” for the EUR/CHF pair. Click on the chart to enlarge it.

Sean Hyman

www.forextradingblog.com

P.S. - Want to learn more about fundamentals and technicals? Sign up for an inexpensive, only forex course today and we’ll show you how: http://www.mywealth.com/currency-trading.html

At the “Economic Turning Point”?

If we’re at the “economic turning point” as I believe we are…then that will be bad for the dollar, yen and Swiss franc but will be particularly good for those currencies that tend to be influenced by inflation, commodities and risk taking…which would be the Aussie dollar, New Zealand dollar, Canadian dollar and British pound…and arguably in that order.

As an additional note, if this is true…then the natural course of “Swiss franc weakness” may kick in and help the Swiss central bank out with a weaker franc. They’ve been proactively “selling francs” but there may come a time (and we could be there now) that the market actually kicks in and “aids” their intervention efforts for a weaker franc to the euro in particular. If so, between their collective “franc selling” and the market’s turning point…it could bode well for those that are long (buyers of) EUR/CHF. The Swiss are attempting to put in a floor on the EUR/CHF pair around 1.50-1.51. So anytime it gets to around the 1.51 region, one could go long the pair with a wide stop and low number of lots and probably experience a good “upside to downside” risk ratio.

I’ll also note that, so far, the Swiss have been able to reverse the daily downtrend on the EUR/CHF pair and have “held the line” quite well so far. You can look at it from most any aspect you wish and it still holds true. The pair is technically above its downtrend line, 50 SMA, 200 SMA, etc…all of which are bullish for the EUR/CHF pair. See the chart below. Click on it to enlarge it.

Want to learn more about fundamentals and technicals? Sign up for an inexpensive, only forex course today and we’ll show you how: http://www.mywealth.com/currency-trading.html

Also, get a free, real time demo trading station here: http://www.fxedu.com/practice-forex-account

Sean Hyman

www.forextradingblog.com

British Pound “Pauses for Breath” [Part 1 of 2]

After a nearly 20% rise against the Dollar, the British Pound has been rangebound for nearly the entire month of June, with one columnist likening the situation to a “pause for breath.” For him, this amounts to a temporary cessation on the Pound’s inevitable upward path: “Compared to long term levels, the pound was still better value than its peers. He said: ‘It’s still cheap - about 10% below it’s trade-weighted average at present.’ ” For others analysts, however, the picture is not so cut-and-dried.

Forgetting about purchasing power parity for a minute, there are numerous factors which could halt the Pound’s rise. First and foremost is the British economy, which is still struggling to find its feet. “The U.K. economy will recover ‘mildly’ next year, according to the OECD, compared with a previous projection of a 0.2 percent contraction. Gross domestic product will drop 4.3 percent this year, versus a March forecast of 3.7 percent.”

Some economic indicators have begun to stabilize, but the two most important sectors, housing and finance, are still wobbly. Economists warn that “any recovery could be slow and uneven because banks are still unwilling to pump loans into the economy.” In the latest month for which data is available, mortgage lending slowed to a record low, with consumer lending not far behind. With regard to housing,”The annual fall in house prices in England and Wales slowed for a third consecutive month in June, according to property data company Hometrack, but prices were still 8.7 percent lower than a year ago.”

There is the possibility that the BOE’s quantitative easing plan and the government’s fiscal stimulus will provide the economy with the boost it needs. At the same time, both programs will have to be reined at some point, sooner rather than later in the case of government spending. With UK national debt predicted to reach 90% of GDP by 2010, “Most people - the prime minister excepted, apparently - believe that taxes will have to rise and/or public spending fall after the next election. This would at least threaten to hold back economic activity.” Not to mention that both QE and government spending could actually backfire and generate inflation without economic growth (i.e. stagflation). BOE Governor Mervyn King captured this overall sentiment, when he said, “I feel more uncertain now than ever. This is not the pattern of a recession coming into recovery that we’ve seen since the 1930s.”

In short, from a purely economic standpoint, it doesn’t look good for the Pound Sterling. But of course forex is about much more than GDP…stay tuned for Part 2, in which I’ll elaborate on this point, and bring interest rates and inflation into the discussion.

G-8: Thinking of reversing $2 Trillion in Stimulus!

This past weekend, the G-8 (Group of Eight - 8 largest industrialized nations) met and started the talks that will eventually reverse the $2 trillion in global stimulus. Of course, they aren’t about to start this process yet since it was just their Finance Ministers at this meeting…but they were setting up the process for when their central bankers will gather in early July (10th - 12th). Why is this important? Because if these central bankers are comfortable enough in talking about reversing the stimulus, then it means that they really think that the global economy is close to being able to stand on its own two feet once again. If this is the case, it will end up helping riskier currencies in the long run (AUD, NZD, CAD, GBP, etc.) and will hurt the defensive currencies that benefited when the world was falling off of a cliff (USD, JPY, CHF). Now this effect will not be immediate. In fact, the dollar and yen are gaining a bit as of this writing. But after a good pull back, look for the trend to return towards “risk seeking” and not back into the defensive mode as we had before. My top picks, of course: AUD/USD and AUD/JPY to benefit the most…as the G-8 acknowledged the rise in commodities as the global economy is recovering.

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