The Pip value represents how much profit or loss a client will make if the price changes for one pip (fourth decimal place in most Forex instruments). Pip value is calculated in the quote currency. The formula for calculating Pip value is as follows:
Pip value = Lots × Contract Size × Pip size
Profit is always calculated in the quote currency and converted into account currency at the order closing price. Therefore:
For Buy orders, we consider the closing Bid price.
For Sell orders, we consider the closing Ask price.
For example, if you are trading in USDHKD and your account currency is USD, the profit/loss calculated in HKD will need to be converted to USD using the Ask/Bid prices at the time of closing. The price choice will depend on the order type.
To calculate the profit/loss, we use a Conversion rate formula:
The conversion rate allows us to accurately calculate the profit/loss obtained at the time of closing. Below are two examples of calculating profit based on the conversion rate. If the account currency is the same as the base currency, the closing price is used to convert the calculated profit/loss to the account currency.
Conversion rate = Order Closing Price (Buy order: closing bid price / Sell order: closing ask price)
If the account currency does not match your base or quote currency, the system uses the price of a currency pair that involves your trade’s quote currency and your account currency to make such a conversion. If it is a Buy order, the Bid price is used, and the Ask price is used for a Sell order.
For example:
Say you are trading in sell EURUSD and your account currency is CAD. The profit/loss calculated in USD will need to be converted to CAD using the USDCAD Ask prices at the time of closing. The price choice will depend on the order type.