Pip Value

Pip value is the dollar amount (or equivalent in the account currency) that a single pip movement represents in a given forex trade. It depends on three factors: the currency pair being traded, the lot size of the position, and the denomination currency of the trading account. For a standard lot (100,000 units) on EUR/USD, one pip equals $10. For a mini lot (10,000 units), one pip equals $1. For a micro lot (1,000 units), one pip equals $0.10.

The calculation differs depending on whether the account currency is the quote currency of the pair. For pairs where USD is the quote currency (e.g., EUR/USD, GBP/USD), the pip value for a standard lot is always $10. For pairs where USD is the base currency (e.g., USD/JPY, USD/CHF), the pip value fluctuates with the exchange rate. For cross pairs (e.g., EUR/GBP), the pip value must be converted through the account currency, adding another variable to the calculation.

In the context of introducing broker compensation, pip value directly affects how much an IB earns under pip rebate or spread-based commission models. If an IB earns 0.3 pips per trade, the actual dollar payout depends on the pip value of the specific instrument and lot size traded. This means an IB whose referred traders focus on standard lots and major pairs will see different earnings than one whose traders use mini lots or trade exotic pairs -- even if the pip rebate rate is identical.