FxBrokerReviews.org – The abbreviation “Pip” stands for price interest point or percentage in fact. According to customs on the forex market, a pip is the slightest whole unit price adjustment that an exchange rate can make.
The last decimal place of the price for most currency pairs is one pip. So, one basis point, 1/100 of 1%, equals one pip.
The slightest whole unit movement, for instance, allowed for the USD/CAD currency pair is $0.0001, or one basis point.
Also read: What is Forex Market?
Wondering what a pip is?
Here we have the answer to all your queries.
The smallest whole unit measurement of the spread between the ask and bid in a foreign currency quote is called a pip. A pip is one-hundredth of one per cent, or.0001. As a result, the forex quote has four decimal places. Fractional pips represent smaller price changes. One-tenth of a pip is a fractional pip.
A fundamental idea in foreign exchange is the pip (forex). A currency whose value is expressed in relation to another currency is bought and sold by forex dealers. These currency quotes are displayed as bid and ask spreads, both of which are accurate to four decimal places.
Pips are the units used to measure exchange rate movement. The smallest whole unit change for most currency pairs, which are stated to a maximum of four decimal places, is one pip.
Also read: The Best Currency Pairs to Trade for Beginners
Worried about how are pips used?
They are a component of the exchange rate market quote for a currency pair. Pips stand for the change in the quote and value of any positions you may have placed in the market. Let’s imagine that you paid 1.1356 for a currency pair and sold it for 1.1360. Your transaction generated 4 pip profit. The monetary amount of your profit would then be determined by multiplying the value of a single pip by the size of your lot.
Worried about calculating pips?
The currency pair, the exchange rate, and the trade value all affect how much a pip is worth. The pip is fixed at.0001 when your forex account is financed with US dollars and USD is the second of the pair (or the quote currency), such as the EUR/USD pair.
In this instance, adding 0.0001 to the trade amount (or lot size) yields the value of one pip. Therefore, multiply a trade value of, say, 10,000 euros by.0001 for the EUR/USD pair. $1 is the pip value. You would make a profit of 10 pip, or $10 if you bought 10,000 euros against the dollar at 1.0801 and sold them at 1.0811.
On the other hand, the pip value also includes the exchange rate when the USD is the first of the pair (or the base currency), as it is with the USD/CAD combination. A pip’s size is calculated by multiplying the trade amount by the exchange rate.
For instance,.0001 multiplied by a typical lot size of 100,000 and a USD/CAD exchange rate of 1.2829 yields a pip value of $7.79. If you purchased $100,000 USD at 1.2829 and then sold it at 1.2830, you would have earned a profit of 1 pip, or $7.79.
A prominent exception to the four decimal place rule is the quotation of Japanese yen (JPY) pairs with two decimal places.
The value of a pip for currency pairs like the EUR/JPY and USD/JPY is equal to 1/100 divided by the exchange rate. One pip is equal to 1/100 132.62 (for the EUR/JPY example) or 0.0000754. The price of one pip would be $7.54 with a lot size of 100,000 euros.
Pips and Profitability
Whether a trader ends the day with a profit or a loss depends on the movement of the exchange rate of a currency pair. If the euro appreciates in value in relation to the US dollar, a trader who purchased the EUR/USD will profit. The trader would have made 66 pip profit if they had purchased the euro for 1.1835 and sold it for 1.1901. (1.1901 – 1.1835).
Consider a trader who sells the USD/JPY pair at 112.06 in order to purchase the Japanese Yen. If the trader closes the position at 112.09, they incur a 3 pip loss on the transaction. If they close it off at 112.01, they make 5 pip profit.
Even while the difference might appear to be minor, gains and losses in the multi-trillion dollar foreign exchange market can build up quickly. For instance, the trader would profit 500,000 on a $10 million position that closed at 112.01. That is equal to $4,463.89 in American dollars (500,000/112.01).
Actual Case Studies of Pip
Exchange rates may become uncontrollable if hyperinflation and depreciation are combined. This can make trading unmanageable and the significance of a pip disappear, which has an effect on customers who are obliged to carry a lot of cash.
A well-known historical instance of this occurred in Germany’s Weimar Republic in November 1923, when the exchange rate plummeted from its level of 4.2 marks per dollar before World War I to 4.2 trillion marks per dollar.
Another example is the Turkish lira, which in 2001 reached a level of 1.6 million to the dollar and was incompatible with many trading systems.
The new Turkish lira is the result of the government’s decision to remove six zeros from the exchange rate. The average exchange rate is now 7.3 lira per dollar, which is more acceptable as of January 2021.
Top Lowest Pip Spread Forex Broker in 2022
- Capital.com
- eToro
- NAGA
- XTB
- Libertex
- AvaTrade
- Interactive Brokers
- TD Ameritrade
- CMC Markets
- Forex.com
Capital.com
Capital.com is our top choice among the least expensive FX brokers. This well-known CFD trading platform, which offers minimal fees and a large selection of tradeable assets, is the finest high leverage broker. The platform itself is governed by a number of prestigious organisations, including the FCA, ASIC, CySEC, and MiFID.
138 currency pairings are available for trading on Capital.com, making it simple to locate trading opportunities every day. Since these pairs are traded through CFDs, all of Capital.com’s fees are included in the spread. For EUR/USD at the busiest trading times, fees for FX trading average just 0.6 pip. Capital.com has established a reputation among investors as one of the top scalping brokers on the market thanks to its aggressive spreads.
Key features
- 0% commission is charged when starting an FX deal.
- A variety of order kinds are available.
- Complete MT4 support
- One of the top forex brokers with ASIC regulation and small spreads.
- Trading in more than 130 currency pairings.
- PayPal and Apple Pay are accepted for deposits.
eToro
eToro is yet another excellent choice among the most affordable FX brokers. eToro, which serves more than 26 million clients in 190 countries, has an outstanding reputation in the trading community. eToro is under regulation from a number of prestigious agencies, including FinCEN, FINRA, CySEC, ASIC, and the FCA.
49 currency pairings, including majors, minors, and a number of exotics, are presently available to trade on eToro. Users don’t have to pay any commissions to open or close trades because all of eToro’s FX pairings are available to trade using CFDs. The fees charged by eToro are instead included in the bid/ask spread, starting at just one pip for liquid pairs like EUR/USD and USD/JPY.
Key features
- Numerous majors, minors, and exotics are available for exchange.
- It is one of the greatest forex copy trading platforms thanks to the well-known “CopyTrader” feature.
- Spreads begin at just one pip.
- The smallest trade size is just $10.
- Extensively controlled throughout many jurisdictions.
NAGA
NAGA Markets is a broker situated in Limassol, Cyprus, and was established in 2009. NAGA Markets, which is governed by CySEC, provides trading in more than 950 instruments, including FX and CFDs on equities, indices, cryptocurrencies, and commodities. Customers have access to a proprietary web-based interface, a mobile app, and the third-party platform MetaTrader 4/5. The NAGA Group AG, a German FinTech business that is listed on the Frankfurt Stock Exchange, uses the trademark NAGA (XETRA: N4G). NAGA had more than 1 million users who had registered by March 2021.
Key Features
- With a variety of resources, including webinars, tutorials, articles, videos, and ebooks, NAGA Markets excelled in teaching.
- A committed account manager and dependable client service are advantageous for beginners.
- VIP accounts with narrower spreads are available to advanced traders, who can also profit from copy trading.
Also read:
How secure is the NAGA trading platform?
Pros and Cons of NAGA
XTB
In addition to supporting indices, commodities, cryptocurrencies, stock CFDs, and ETF CFDs, XTB is a well-known FX broker. Their low spreads for forex trading start at about 0.1 pip, depending on the product.
In addition to keeping up with the forex markets and the most recent FX news in their Market Analysis area, traders may learn how to trade forex through XTB’s training courses designed for novice and advanced traders.
Key features
- Security & Safety Are Priorities.
- Quick deposits and withdrawals.
- Available Micro-lot Trading.
Also read: XTB Broker Review
Libertex
Investors need to go no farther than Libertex for the lowest spread forex broker. Because the platform doesn’t charge spreads on FX trades and is regarded as one of the top MT5 brokers, Libertex holds a unique position in the market. Instead, Libertex levies a commission—which varies according on the asset—when trades are made.
However, some pairs, including EUR/USD and GBP/USD, do not charge a commission. When the position is opened, a multiplier will be used to determine a tiny commission of about 0.0003% for other pairs. Libertex does not impose any monthly account fees or deposit fees in addition to these commissions.
Key features
- Zero spread fee structure.
- Complete assistance for MT4 and MT5.
- Provides a free demo account option.
AvaTrade
AvaTrade is one of the top low spread forex brokers to take into account when it comes to stringent regulation. AvaTrade is a CFD trading platform with up to 30:1 leverage and 55 currency pairs available for trading. AvaTrade is supervised by the Central Bank of Ireland, ASIC, FSA, and FSCA, all of which provide strong investor protection.
There are no commission fees assessed when a trade is opened because AvaTrade’s currency pairings are exchanged using CFDs. Since spreads begin at 0.9 pips for highly liquid pairs, AvaTrade isn’t the lowest spread forex broker on our list, but the platform does include a wide range of different trading instruments.
Key features
- MT4 and MT5 are supported.
- Provides a range of vanilla alternatives.
- Globally very tightly regulated.
Also read: AvaTrade Broker Review
Interactive Brokers
Interactive Brokers is one of the top trading platforms with low FX spreads. A US-based site called Interactive Brokers is overseen by a number of powerful agencies, including the SEC and the FCA. Users of this platform get access to 105 different currency pairs, making it one of the platforms with the most options on our list.
The commission that Interactive Brokers charges is determined on the monthly trading volume of each user. A 0.20 basis point (BPS) commission is assessed for volumes under $1,000,000, with a $2 minimum fee. In addition, Interactive Brokers does not tack on any extra fees for placing FX trades.
Key features
- No minimum deposit requirement.
- Tradeable in more than 100 currencies.
- Controlled by the SEC.
TD Ameritrade
Since there are no commission fees when a trade is opened or closed, TD Ameritrade is one of the least expensive forex brokers for traders in the US. All 70 trading pairs that TD Ameritrade offers—including exotic pairs like ZAR/JPY and NOK/SEK—are in this situation.
The spread, which changes based on the pair but is still comparable with the other services on this list, includes all of TD Ameritrade’s expenses. Although there is no minimum deposit required for account opening, users who want to trade on leverage must deposit at least $2,000 into their account.
Key features
- Leading thinkorswim platform in the industry.
- No commissions are charged when trading.
- Provides a variety of exotics.
CMC Markets
Since the platform has been in use since 1989, CMC Markets is regarded as one of the top low spread forex brokers. The platform’s main firm is listed on the London Stock Exchange, which lends it further legitimacy. It is also subject to FCA regulation.
As users can trade over 330 currency pairings, CMC Markets offers a wide variety of assets. Additionally, this tool uses “precise pricing,” which compares prices from several banks to provide users with the best deal. Additionally, CMC Markets boasts extremely quick execution, assuring little to no slippage.
Key features
- More than 330 different currency pairs.
- No minimum deposit requirement.
- Feature for “precision pricing”.
Forex.com
As the name suggests, Forex.com is a trading platform that was established in 2001 and focuses on currency trading. The CFTC oversees this platform in the US and there is strict regulation across the board. Additionally, the parent business of Forex.com is also listed on the NASDAQ.
Over 90 FX pairs are available to trade on Forex.com, with a maximum leverage of 30:1 for main pairings. A leverage of 20:1 is available for trading minors and exotics, and all commissions are included in the spread. However, average spreads for EUR/USD typically exceed one pip, making them significantly more expensive than other options on our list.
Key features
- STP account available.
- 50:1 or more leverage.
- On the NASDAQ stock market.
Final Words
To summarise, this guide has analysed a selection of low pip spread forex brokers, highlighting their costs, features, and asset choices. It might be difficult to decide which broker to work with at first, but by examining the information in this guide, investors can be confident that they will choose a platform that meets their needs.
We believe that with this guide you would understand what exactly is a pip and all about the lowest pip spread forex brokers. For a better experience, we would recommend you to invest and trade on the above-mentioned brokers such as capital.com, eToro, NAGA etc as they provide the best low pip spread and also are beginner friendly.
