- What is a PIP in Forex?
- Why Are PIPs Important in Forex Trading?
- What Is a Spread in Forex?
- How Do PIPs Work with the Japanese Yen (JPY)?
- What Is Forex Pair Volatility?
- What Are The Types of Forex Currency Pairs?
- How to Calculate the Value of a PIP in Forex?
- How to Use Our Forex PIP Calculator?
- How Do PIPs Impact Trading Risk?
- How Do News & Events Impact PIP Movements?
The foreign exchange market (Forex) is the largest financial market globally, with trillions of dollars traded daily. For traders in Singapore, understanding PIPs (Percentage in Point) is essential, as PIPs measure price movements in currency pairs and help determine potential trading profits and losses.
To simplify the process, we offer a free PIP Calculator—a tool that quickly determines PIP values so you can manage risk, optimise trades, and make informed trading decisions.
What is a PIP in Forex?
A PIP (Percentage in Point) is the smallest price movement a currency pair can make in most forex trading platforms.
For most currency pairs, a PIP is equal to the fourth decimal place of an exchange rate.
For example
If the USD/SGD exchange rate moves from 1.3500 to 1.3515, that’s a 15 PIP change. Since forex markets move rapidly, PIPs provide a standardised way to measure price fluctuations efficiently.
Why Are PIPs Important in Forex Trading?
PIPs are crucial because they help traders:
- Calculate profits and losses by measuring price changes per trade.
- Set stop-loss and take-profit levels for risk management.
- Understand spreads, as brokers charge fees through bid-ask spreads measured in PIPs.
What Is a Spread in Forex?
A spread is the difference between the buy price (bid) and sell price (ask) of a currency pair. This is how brokers generate revenue instead of charging direct commissions.
For example
If the USD/SGD buy price is 1.3510 and the sell price is 1.3508, the spread is 0.0002 (or 2 PIPs). A lower spread means lower trading costs.
How Do PIPs Work with the Japanese Yen (JPY)?
For most currency pairs, a PIP is measured at the fourth decimal place (0.0001). However, for Japanese Yen (JPY) pairs, a PIP is measured at the second decimal place (0.01).
For example
If SGD/JPY moves from 85.60 to 85.85, that is a 25 PIP movement.
What Is Forex Pair Volatility?
Volatility refers to how much a currency pair moves in PIPs over a certain period, such as a day. More volatile pairs experience bigger price swings, which can present both profit opportunities and risks.
Formula for Volatility: Volatility = Highest price - Lowest price
For example
If USD/SGD reaches a high of 1.3550 and a low of 1.3510, the daily volatility is: 1.3550 - 1.3510 = 40 PIPs
What Are The Types of Forex Currency Pairs?
Forex currency pairs are divided into Major Pairs, Minor Pairs, and Exotic Pairs. Understanding these categories is important, as different pairs have varying liquidity, volatility, and trading costs.
Major Pairs
Major pairs are the most traded currency pairs worldwide and always include the US dollar (USD). These pairs have high liquidity, tighter spreads, and lower trading costs.
Examples:
- USD/SGD – Represents the exchange rate between the US dollar and the Singapore dollar, influenced by US Federal Reserve policy and the Monetary Authority of Singapore (MAS).
- EUR/USD – The most traded currency pair globally, reflecting economic conditions in the Eurozone and the US.
- USD/JPY – A highly liquid pair, affected by Japan’s monetary policy and global risk sentiment.
Major pairs generally have lower volatility and lower trading costs.
Minor Pairs (Cross Currency Pairs)
Minor pairs, also known as cross-currency pairs, do not include the US dollar (USD). These pairs involve other major global currencies.
Examples:
- EUR/SGD – The exchange rate between the Euro and the Singapore dollar.
- GBP/SGD – The exchange rate between the British pound and the Singapore dollar.
- AUD/SGD – The exchange rate between the Australian dollar and the Singapore dollar.
Minor pairs tend to have higher volatility and wider spreads than major pairs.
Exotic Pairs
Exotic pairs consist of one major currency and one currency from an emerging or smaller economy. These pairs have lower liquidity and higher trading costs due to wider bid-ask spreads.
Examples:
- SGD/THB – Singapore dollar vs. Thai baht.
- USD/IDR – US dollar vs. Indonesian rupiah.
- EUR/MYR – Euro vs. Malaysian ringgit.
Exotic pairs experience larger PIP movements and are considered riskier due to high volatility.
How to Calculate the Value of a PIP in Forex?
The value of a PIP depends on the currency pair and trade size.
Formula: PIP Value = (PIP Change × Lot Size) ÷ Exchange Rate
For example
If USD/SGD moves from 1.3500 to 1.3501 (1 PIP change):
Lot size = 100,000 units
Exchange rate = 1.3501
PIP Value = (0.0001 × 100,000) ÷ 1.3501 = SGD 7.41
Most forex trading platforms automatically calculate PIP values, but understanding the calculation helps with risk management.
How to Use Our Forex PIP Calculator?
Calculating PIPs manually can be time-consuming. Our free PIP Calculator helps traders instantly determine the profit or loss on any trade.
How it works:
- Enter the number of PIPs moved.
- Select the currency pair (e.g., USD/SGD).
- Enter the trade size (lot size).
- Choose your deposit currency.
- Click "Calculate" to see the exact PIP value for your trade.
How Do PIPs Impact Trading Risk?
While PIPs measure market movements, trading with high leverage can magnify both profits and losses.
Key risk factors:
- Higher leverage means larger position sizes, increasing profit/loss per PIP movement.
- Market volatility can cause rapid PIP movements and unexpected losses.
- Holding positions overnight may result in swap fees, affecting overall profitability.
How Do News & Events Impact PIP Movements?
Major economic events can cause large PIP swings, affecting forex trading.
Key events that influence PIP volatility:
- MAS Interest Rate Announcements – Monetary policy changes can impact SGD pairs.
- US Federal Reserve Decisions – Rate hikes or cuts affect global currency markets.
- Employment Reports – Singapore and US job data can trigger strong PIP movements.
- GDP & Inflation Reports – Economic performance influences currency demand and pricing.
Trading during major news releases increases volatility—using stop-loss orders can help manage risk.
Understanding PIPs is essential for making informed trading decisions. By knowing how PIPs work, traders can:
- Manage risk effectively.
- Maximise potential profits.
- Develop a structured forex trading strategy.
Use our free PIP Calculator to simplify your trading, calculate PIP values, and optimise your trade decisions.
