forex pips value

forex pips value
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A Guide to Forex Pips

Forex Pips: Is the word sounding like a Greek to your ears? Most of the people are not used to this term and it does sound odd. But in reality this word is only a term that is used to refer to anything, like a software or broker, to monitor your foreign trade business. Forex Pips is the short form for Foreign Exchange Price Interest Point. To simplify it further it means the minimum increase that a tender can have. It tells about the rate at which the trade is progressing in reference to the minimum cost. Pips in exact terms indicate the rate at which the value of foreign exchange is increasing or decreasing. Forex Price Interest Point is calculated in the form of percentages and is lot better than the other methods in the market.

When the value aspect of the Pips is concerned then it is equal to one over one hundred percent i.e. 1/100%. This helps in the sense that the businessmen will get to know about the point per point change in the market. This is similar to the minute by minute terminology that we normally use. If you want to determine the value of each pip then you can do that by noticing the money lost or gained for every Pip lost or gained. You can also calculate this by dividing the pip represented in the decimal form by the prevailing exchange rate.

But why do we need to use the Forex Pips? This is because of the fact that in the global trading there is no global currency. Although the US dollar is considered as reference point for most of the currencies but still you will find some instances where there is no US currency involved. So to come over this handicap, the Forex Pips is used as in this a bit of every currency is present.

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Problem with Forex Trading?

I am new to Forex and practicing using FXCM trading platform. Yesterday I bought 4 standard lots of EUR/CHF. the account balance at time of purchase was some 4000$.I slept at night after putting a limit order which was 15 pip higher than the value I bought.In the morning I saw the position is automatically closed giving me a loss of some $2000. I was shocked to see how the postion get closed automatically if i havent put any stop order.Any explanation of this cause is appreciated.

If the position was closed automatically without any stop or limit set, then it was most likely a margin call. If you were left with $2,000 in the account then the margin requirement for each 100k standard lot would have been $500 indicating a total margin requirement of $2,000. This leaves you with $2,000 in usable margin to guard against losses on your account. If the $2,000 goes to $0 due to losses on your EUR/CHF positions, a margin call will occur.

You can verify if the trades were closed due to a margin call by running a report on your account. Goto the top of the platform, click on the Report button, and run the report for the day the trades were closed. In the Close Position section at the top of the trading report, you will see a column titled Condition. If it lists MC as the condition for the closing order, that stands for Margin Call.

There's also an explanation of the margin call feature on FXCM's website here http://www.fxcm.com/execution-risks.jsp, scroll down towards the bottom of the page.

If that doesn't answer it completely, I would recommend contacting client support since support available 24/7.

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