Direct answer
Pip value is the estimated monetary value of a one-pip move for a specific FX position. For Euro crosses (pairs where neither currency is USD), the calculation depends on (1) the pip size convention for the pair, (2) your position size, (3) which currency the pair quotes for the pip movement, and (4) how you convert that quoted “pip currency” into your account currency.
Because Euro crosses typically use EUR as one side, the “pip currency” is usually the other (non-EUR) currency in the pair. If your account currency is not that pip currency, you route the conversion through an additional FX rate chain to express the pip value in your account terms.
Mechanism and definition
What a pip represents
A pip (percentage in point) is a standardized price increment used to express movement in FX. The most common convention for many major FX pairs is that one pip equals 0.0001 in price for pairs quoted to five decimals. Some markets also quote at a different decimal precision, which changes pip size.
Inputs you need to compute pip value
You need to state assumptions before computing:
- Pair (example format: EUR/GBP, EUR/JPY).
- Pip size for that pair under your quoting convention (e.g., 0.0001, or 0.01 for JPY-quoted pairs under typical conventions).
- Position size in contract units (often expressed as base units, such as “1 lot = 100,000 base currency units,” but confirm your own contract specification).
- Your account currency (e.g., EUR, GBP, USD).
Canonical calculation flow
The general workflow is:
- Convert the pip move into an amount in the pair’s quote currency using pip size and position size.
- Convert that amount into your account currency if they differ.
Step 1: pip move amount in the quote currency
For a pair quoted as EUR / X (EUR is the base currency; X is the quote currency), the price is “X per 1 EUR.” A one-pip price change changes the quote-currency value per 1 EUR by:
- Quote currency change per 1 EUR = pip size (in units of X).
If your position is N base units of EUR (so N EUR), then the quote-currency amount change for one pip is:
- Quote-currency pip amount = N × pip size.
This yields a value in currency X (the pair’s quote currency).
Step 2: convert to account currency
If your account currency equals X, then pip value in account currency is the quote-currency pip amount.
If your account currency is different (common for Euro crosses), you convert using a relevant FX rate. Conceptually:
- Account-currency pip value = (quote-currency pip amount) × (conversion rate from X to account currency).
This conversion rate may be directly observable or derived by inverting another quote, depending on which direction the market shows the rate.
Evidence or example (with explicit assumptions)
Example A: EUR/GBP with an account in GBP
Assumptions:
- Pair: EUR/GBP.
- Pip size: 0.0001 (price step for the quoting convention you use).
- Position size: N = 100,000 EUR (base units).
- Account currency: GBP.
Compute:
- Quote-currency pip amount in GBP = N × pip size = 100,000 × 0.0001 = 10 GBP.
- Since the account currency is also GBP, pip value = 10 GBP per pip.
Example B: EUR/GBP with an account in USD
Assumptions (continue):
- Quote-currency pip amount is still 10 GBP.
- You need conversion from GBP to USD.
- Let R = USD per 1 GBP (the FX rate you use for conversion under your chosen reference).
Compute:
- Pip value in USD = 10 GBP × R.
If instead you observe a rate quoted as GBP per 1 USD, you would invert it to get USD per 1 GBP before applying the multiplication. The failure mode here is mixing up the rate direction.
Example C: EUR/JPY and pip-size sensitivity
Assumptions:
- Pair: EUR/JPY.
- Under your quoting convention, assume 1 pip = 0.01 in the JPY price.
- Position size: N = 100,000 EUR.
- Quote currency is JPY; account currency is JPY.
Compute:
- Quote-currency pip amount in JPY = 100,000 × 0.01 = 1,000 JPY.
If you accidentally use the non-JPY pip size (0. 0001), you will be off by a factor of 100.