Pips, Points, Ticks and Conversion

Second Officer · SO01: Know What You Trade · About 25 minutes

Safety rule: Always write the unit beside a price difference before converting it into money.

Your mission today

By the end you can convert price movement into pips or ticks and calculate the cash result using verified contract units.

Before you start

Bring your symbol cards from SO01.2 and a calculator. You must know each contract's size or tick value before doing money calculations. All prices below are imaginary training numbers.

1. Why a price difference needs a unit

Suppose someone says a car travelled "50". You need to ask: 50 metres or 50 miles? Trading has the same problem.

For many EURUSD quotes, a pip is 0.0001. That is the fourth decimal place. For many yen currency pairs, a pip is 0.01. Other products may use different conventions, so confirm the symbol.

A point can mean the platform's smallest displayed price change. On a five-decimal EURUSD screen, the platform's point may be 0.00001. That makes ten such points equal one conventional pip.

A tick is the minimum allowed price movement under an instrument's rules. Futures and some other products have fixed tick sizes. A tick is not automatically one pip, one dollar or one platform point.

First write the difference in price units. Only then convert.

2. Worked example: the loss comes first

Imagine a long EURUSD position opened at 1.0842 and closed at 1.0827.

Step 1: Find the signed move.

1.0827 − 1.0842 = −0.0015 USD per euro.

Step 2: Convert to conventional pips.

−0.0015 ÷ 0.0001 USD/EUR per pip = −15 pips.

On a five-decimal platform where one display point is 0.00001, the same move is −150 display points. The two numbers describe exactly the same distance.

Step 3: Convert to cash with a stated contract.

Assume one lot represents EUR 100,000 and you traded 0.10 lot, or EUR 10,000.

EUR 10,000 × −0.0015 USD/EUR = −$15 before fees.

The same size rising by +0.0015 instead would produce +$15 before fees. You cannot decide whether a move is affordable by looking at "150" without knowing what it means.

Original Black Box Journey teaching illustration. Synthetic example; not historical market data.

3. A different market needs different arithmetic

Imagine a teaching futures contract with a minimum tick of 0.25 index points. Its stated tick value is $12.50 for one contract.

If you are long and price falls by 1.00 index point:

• Adverse distance: 1.00 index point.
• Tick count: 1.00 ÷ 0.25 = 4 ticks.
• Price loss: 4 ticks × $12.50/tick = $50, before fees.

If price rose by 1.00 point, the price result would be +$50. These are hypothetical specifications, not an identification of a real futures product.

Now imagine a different gold derivative. You cannot use the futures tick value just because both charts move up and down. Open that gold instrument's specification first.

4. What if your account uses another currency?

Suppose an imaginary result is −$20 USD, but your account is measured in ringgit. You need a currency conversion to show the account result.

If an example conversion rate is RM4.50 per $1 USD, then:

−$20 USD × RM4.50/USD = −RM90, before any conversion charges.

A positive $20 result would instead be +RM90 under the same imaginary rate. In live accounts, the applicable exchange rate and fees depend on the platform and timing.

When a pair has a different profit currency, the path may involve another exchange rate. The safest beginner habit is to verify the platform's trade-calculation method and compare your worksheet with its demo calculator.

5. Use a unit-checking routine every time

A reliable worksheet has five rows:

1. Entry and exit prices, including direction and executable quote side.
2. Raw signed price difference, with units.
3. Pips or ticks, using the correct symbol convention.
4. Contract units and volume, from the actual specification.
5. Gross price result, costs and account currency, each shown separately.

Never deduct the same spread twice. If your recorded entry and exit already include the executable Bid and Ask, that spread effect is reflected in the price difference. Commission and financing may still be separate.

Use the same worksheet for a winner and a loser. The arithmetic does not change because the outcome feels different.

Common mistake

A beginner sees 150 displayed points and calls them 150 pips. On the five-decimal EURUSD example, that is ten times the correct pip count. Fix it by dividing raw price movement by the defined pip size.

Plain-English glossary

• Pip: A conventional unit for measuring forex price movement.
• Point: A platform or contract price unit whose meaning must be checked.
• Tick: The smallest permitted contract price increment.
• Tick value: The cash value of one tick for stated contract volume.
• Gross result: Profit or loss before separate costs.
• Conversion rate: The exchange rate used to express one currency in another.

Try it yourself

Work out ten imaginary movements: four EURUSD, three USDJPY and three from a third symbol whose specification you can read. For each, show the raw move, pip/tick count, position units, signed cash result and currency. Include at least two losses and one currency conversion. Save the calculation and your broker-specification source in the journal.

What you can now do

• Convert signed price differences into the correct market units.
• Calculate a gross cash result with stated contract assumptions.
• Catch mismatches between display points, pips and ticks.

Next lesson

SO01.4 · Sessions, Closures and Economic Events. You will learn why the time of a trade can change its risks.