What a pip is worth in money
What you learn in 3 minutesThis lesson shows what one pip is worth in naira, so the cost of a move is clear before any trade is placed.
Twenty pips on 0.10 lots of EUR/USD
| Step | Amount | Note |
|---|---|---|
| Trade size | 0.10 lots | One tenth of a standard lot |
| One standard lot | 100,000 units | The standard contract size for EUR/USD |
| One pip on one standard lot | 10 units of the quote currency | 100,000 x 0.0001 = 10 |
| One pip on 0.10 lots | 1 unit of the quote currency | 10 x 0.10 = 1 |
| Twenty pips on 0.10 lots | 20 units of the quote currency | 1 x 20 = 20 |
| Naira value at an example rate of ₦1,600 per unit | ₦32,000 | 20 x 1,600 = 32,000. The rate used here is an example only; the live rate varies. |
The broker may round the pip value, apply a spread on entry and exit, and charge a commission or swap on positions held overnight. These charges vary between brokers, so the final amount can differ from the figure above.
The mistake people make here
The common mistake is to think a pip has one fixed naira value. It does not. The value changes with the lot size, with the pair, and with the exchange rate used for conversion. A reader who assumes twenty pips always equals the same naira amount will misjudge both the possible gain and the possible loss. Instead, work out the pip value for the exact lot size and pair before placing the trade, and treat the naira figure as an estimate that the broker may adjust.Check yourself
If one pip on 0.10 lots of EUR/USD is 1 unit of the quote currency, what is twenty pips worth in that currency?
20 units. 1 x 20 = 20.
If the conversion rate is ₦1,600 per unit, what is twenty pips on 0.10 lots worth in naira?
₦32,000. 20 x 1,600 = 32,000.
If the trade size is doubled to 0.20 lots, what happens to the naira value of twenty pips at the same rate?
It doubles to ₦64,000. 40 units x 1,600 = 64,000.
In Nigeria
- Money
- Naira, written ₦ (NGN)
- Regulator
- SEC Nigeria
- Instrument in the example
- EUR/USD, around 1.0850
- Payment methods
- Bank transfer, USSD and cards
- Conversion note
- The naira value of a pip depends on the exchange rate at the time, which varies