If you have started taking your first lessons as a forex beginner, then you must have come across the concept of pips, which is something very basic and yet essential for trading in the currency market. The concept of pips and its application in trades are all quite simple for experienced forex traders, but beginners need more time to grasp the technicalities behind pip calculation. However, you cannot move forward as a forex trader without being well-versed in the process of pip calculation. So, we have made this comprehensive beginner guide to pip calculation on MT4, which you can rely on to start your trading journey easily.
Basics of Reading Pips on MetaTrader 4
Before moving forward, we will cover the basics of pip reading on MT4, as it is the most popular trading platform in the forex world even now. It is also one of the most beginner-friendly trading softwares you can find; hence, we suggest MT4 as the perfect platform for first-time traders. Those who are entirely new to the currency world should start with a demo account at first, as it eliminates the risk of losing real money even if you make some mistakes during the learning process. You just need to sign up with a broker who offers a demo account facility with MT4, and you can start learning the basic concepts of forex trading along with reading pips.
Pips are the standard unit that all forex traders commonly use to measure and state the exchange rate fluctuations of the currencies they trade with. In other words, price interest point or pips expresses the extent to which the price of a currency pair has moved in a brief amount of time. Pips are effective for changing the smallest price movements that happen in the forex market as it is measured at the 4th decimal place for almost all currency pairs, while pairs with Japanese Yen are the odd one out as their pip is stated at the 2nd decimal place. But if you look at other asset classes, such as cryptocurrencies, the pip reading mechanism will be even more different.
To talk about the general formula for pip value calculation, it is stated below for your reference.
Pip value = (1 pip/ current exchange rate)/ trade size in lots.
What Does One Pip Change Mean in MT4 Trading?
As mentioned, pips are always calculated in decimals, as one pip typically means 0.01 for JPY pairs and 0.0001 for all other pairs. But again, if the pairs display a change in price, which is even less than one pip, then the calculation will be done in points, which is a bit more complex. For example, if a currency pair’s price moves from 1.0001 to 1.0002, that will be stated as one pip change in MT4 Trading. The trader who has opened a long position in the said currency pair will be gaining profits that are equivalent to one pip in such a situation.
MetaTrader 4 Pip Calculation methods
To calculate pips on MT4, you must have an account on the trading platform, which you can open quite easily. You can download the software from your broker’s website and sign up for your account. Alternatively, you can also access the platform’s web version for signing up. Once you create an account, you will be given login credentials via email, which you can use to access your account. Now, you calculate pips and do numerous other things on the platform.
First method- Do it manually
Firstly, you must choose the currency pair you wish to trade with and go to its price chart. You need to place two horizontal lines on the top and bottom of the chart and then deduct the value of the lower line from the value of the line at the top. This is done to measure the distance between the lines, and this is the traditional way of calculating pips using MT4 charts. But this manual technique may end up consuming a lot of your time, and those who are new may even get confused with this process.
Second Method- Use Crosshair cursor
The crosshair cursor is the best tool for pip calculation on MT4, as it is easier and faster than trying to do the calculation manually using the lines. For this, you can go to the line studies toolbar on MT4 and select the crosshair feature, which is usually at the top. Another way to do this is by pressing the mouse wheel while hovering the cursor on a price chart on the MT4 platform. You will hear a click sound, and a mouse crosshair cursor will appear on the charts. But sometimes, your mouse may not have this feature, so we added the first method with the toolbar.
Once you activate this tool, simply left-click on the point from which you want to calculate the pip difference and move to the next point without letting go of the button. You will see 3 numbers appearing on the right side of the cursor. The first number states the number of candlesticks, bars, or lines you crossed between the beginning and end points of the crosshair movement as you dragged the mouse while holding down the left button. The difference in points between the two points will be given second, and the 3rd number is actually the crosshair cursor’s price.
Pip Counting Tool on MT4
The second method can also be a bit tough for an average beginner, and I suggest you use this simple tool, which is apt for pip counting on MT4. This tool is a pip counter indicator that you can easily find and is available for free. You just need to download this pip counter and add it to your price chart on the MT4 platform. This tool is extremely useful for tallying the pips of open positions on MT4. Another tool that I recommend using for pip calculation is the pip calculator, which calculates the pips you’ve captured or lost in your account’s base currency, giving you a clearer idea about the money you’ve earned or lost.
Calculating pips is essential for each trade as the potential profits, losses, stop loss levels, and take profit levels need to be decided with the number of pips. Moreover, almost every decisive point of a trade is based on pip values and pip movements. You may not find enough time to do the pip calculation manually before every single trade, and doing so also results in a higher possibility of errors in calculation. The usage of an automated pip calculator speeds up the process as it gives instant results with the most precision.
Counting Pips on MT4 App- For Android users
Now, for those who use the MT4 app on their Android smartphone, the method for counting pips would be different. You will have to go by the old-school method of drawing a trend line, but do not release the line until you see the 3 numbers displayed on the upper left side of the chart.
Counting Pips on MT4 App- For iOS users
The method remains the same, but you just need to use the iOS version of the app with the login credentials provided by your broker. You can easily download the iOS version of the app from your broker’s website.
Final Thoughts
So, with that, we are wrapping this beginner’s guide to pip calculation on MT4. We already talked about different pip calculation methods, including manual calculation. However, usage of automated tools is best in the fast-moving forex market as you won’t be fond of missing out on trading opportunities as you get caught up with the tiresome calculation process. So, make sure you use these powerful tools to simplify the pip calculation process for yourself, giving you enough time to focus on other key aspects of trading.