The meaning of pips on PIP forex trading is short for Point In Percentage and simply pip is something we are looking for when trading forex. The size of the pip determines the size of the Profile / Loss because the calculation is based on the pip itself. Pip calculation starts from the fourth digit of the price, for example EUR / USD 1.0845, then the calculation of the number of pips starts from the 4th digit from the back of the comma which is number 5.
If we open a Buy position EUR / USD at the point 1.0845 and close the Close Sell position at the point 1.0924 then the amount of profit obtained is 79 Pips which is obtained from the difference between the selling and buying value (1.0924 – 1.0845).
There are also brokers that display currency points with 5 digits behind the comma, for example Buy GBP / USD position 1.45291 and we close Sell GBP / USD 1.45493 then the profit is 20.2 Pips. For brokers who display up to five digits behind the comma, the calculation is more accurate than the four digits behind the comma.