Direct answer
Pip value for Base Currency describes how much one pip move changes the value of a position measured in the base currency itself (or equivalently, how you reach base-currency value before converting to another account currency). For a forex pair quoted as Base/Quote, the pip move is applied to the quote price, but the resulting monetary value must be expressed in the base currency unit.
Because providers and platforms may display pip value in different “currency-of-measure” choices, a robust explanation is to (1) compute the per-pip value in quote terms from the pip size, then (2) convert into base-currency terms if needed, and finally (3) convert into your account currency if your account currency is different.
Mechanism and definitions
1) Base/Quote and pip size
Let a forex pair be written as:
- Base currency (B) / Quote currency (Q)
- Spot exchange rate: R = B per Q in the usual market notation sense.
In most retail forex quoting, the pip is a standardized “tick” in the quoted price. A common approximation is:
- For pairs quoted with 4 or 5 decimals, 1 pip = 0.0001 in the quoted price.
- For pairs quoted with 2 or 3 decimals, 1 pip = 0.01.
Assumption for calculations: You use the pip size that matches the instrument’s quoting format (this can vary by broker or symbol settings).
2) Lot size and the position quantity
A standard lot is commonly defined as 100,000 units of the base currency. Let:
- L = position size in lots
- N = units of base currency in the position = 100,000 × L (using the standard convention)
3) Starting point: pip move in quoted price terms
A one-pip move changes the quote price by:
- ΔR = pip_size
For a position whose value changes with the quoted price, the change in “quote-currency value” implied by one pip is proportional to the base quantity. A widely used model is:
- Value change per pip (in quote currency) = N_base × pip_size
This gives you the monetary impact per pip in quote currency, not base currency.
4) Routing to “Base Currency” terms
To express pip value in base currency, you need to convert the quote-currency impact into base-currency units.
Because the pair is B/Q, an exchange rate relates the two currencies. If you have an exchange rate R that allows conversion between Q and B consistently, then:
- Pip value in base currency = (Pip value in quote currency) / R
Putting the steps together under the same assumptions:
- Pip value (quote currency) = N_base × pip_size
- Pip value (base currency) = (N_base × pip_size) / R
Important: The exact direction of conversion depends on how you define R and how the platform labels the pair. If your rate convention differs, the conversion may multiply instead of divide. The reliable way is to check with dimensional analysis: the final units must be base currency.
5) If your account currency differs
Often pip value is shown in your account currency (A). Then you route via conversion:
- If A equals base currency: Pip value in A = Pip value in base currency
- If A equals quote currency: Pip value in A = Pip value in quote currency
- If A is neither base nor quote: convert from base (or quote) into A using the needed exchange rate(s) at the same valuation moment.
A generic routing pattern is:
- Convert the base-currency pip value into account currency using A/B or B/A appropriately.
Evidence or example (with explicit assumptions)
Example setup:
- Pair: B/Q where B is base currency and Q is quote currency
- Standard lot: 100,000 base units per lot
- Position size: L = 0.50 lots ⇒ N_base = 50,000
- Pip size (quoted-price tick): pip_size = 0.0001
- Current quoted rate: R = 1.2500 (consistent with the B/Q pair notation)
Step 1 (quote-currency pip value):
- Pip value (quote currency) = 50,000 × 0.0001 = 5.00 Q per pip
Step 2 (base-currency pip value):
- Pip value (base currency) = 5.00 / 1.2500 = 4.00 B per pip
So, for this model and assumptions, one pip corresponds to 4.00 units of base currency per pip move for a 0.50-lot position.