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1. Basic interview question

How do I calculate the profit and loss value per pip?

The profit or loss per pip is always calculated based on the quote currency.

The quote currency is the second currency in the pair – eg USD in the EURUSD currency pair.

If your account is in the same currency as the quote currency, any profit or loss made does not need to be converted.

If not however, your profit or loss will be converted into your account currency at the spot rate at the time the position is closed.

In the table below, you can find pip values.

Normally you calculate the pip value to the fourth decimal place, ie 0.00010, for all pairs except the Japanese yen (JPY) pairs where it’s calculated to the second decimal, ie 0.010.

Lot sizeUnits of base currency (first currency in a pair)Profit and loss per pip in the quote currency (second currency in a pair) / for JPY pairs
1100,00010 term currency / JPY1,000
0.110,0001 term currency / 100 JPY
0.011,0000.1 term currency / 10 JPY
Calculation:

P&L per pip = trade colume x pip size

e.g. for EURUSD 1 lot trade:

P&L per pip = 100,000 x 0.0001 = USD10

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