What a pip is worth in money
What you learn in 3 minutesTwenty pips on a 0.10 lot of USD/ZAR is R20. That is the whole lesson: a pip is a price step, and what it pays depends on how much of the instrument your trade controls.
20 pips on USD/ZAR, worked out in rand
| Step | Amount | Note |
|---|---|---|
| Position | 0.10 lots | 10,000 of the base currency |
| One pip | 0.0001 | the fourth decimal of the quote |
| Value of one pip | R1.00 | 10,000 × 0.0001 |
| A 20-pip move | R20.00 | 20 × R1.00 |
| The same move on 1.00 lot | R200.00 | ten times the position, ten times the money |
The quote currency of USD/ZAR is the rand, so the pip value is already in rand and does not need converting. Your broker may round it to the cent, and the spread is charged on top of this arithmetic, not inside it.
The mistake people make here
Reading a pip as a fixed amount of money. The same 20-pip move is R20 on a 0.10 lot and R200 on a full one, and on a pair quoted in another currency it has to be converted before it means anything in rand. Work the value out for the position you are actually about to open, not for the one in the example you read.Check yourself
A 0.05 lot position on USD/ZAR moves 30 pips in your favour. How much is that in rand?
R15. A 0.05 lot is 5,000 of the base currency, so one pip is 5,000 × 0.0001 = R0.50, and 30 pips is 30 × R0.50.
Why does the pip value of USD/ZAR need no conversion for a reader in South Africa?
Because the rand is the quote currency — the second one in the pair. The pip is a step in the price of the dollar expressed in rand, so its value comes out in rand already.
Your stop is 40 pips away and you are willing to lose R400 on the trade. What position size does that allow?
R400 ÷ 40 pips = R10 per pip. At R10 per pip on USD/ZAR that is 100,000 × 0.0001 = one standard lot. The calculator on the tools page does the same arithmetic.
In South Africa
- Pair used in these examples
- USD/ZAR
- Pip value, 0.01 lot
- R0.10
- Pip value, 0.10 lot
- R1.00
- Pip value, 1.00 lot
- R10.00
- Quote currency
- Rand — no conversion needed