What “counting pips” means on thinkorswim
In forex, “counting pips” means converting a price change into standardized increments called pips. A pip is defined as a fixed change in the quoted price, but the numeric size of that change depends on how the pair is quoted (for example, whether prices typically show four decimals, two decimals, or another convention).
On a platform like thinkorswim, you typically see a price with a certain number of decimal places. To count pips effectively, you need to (1) decide the pip size for the selected pair and (2) relate that pip size to the platform’s displayed price movement in points (decimal increments) or in whatever “units” the chart/tool shows.
Mechanics: convert price movement into pip increments
Use this workflow conceptually, independent of any specific button labels:
- Identify the pair’s pip size assumption
- Determine what one pip represents for the instrument you are charting (how many decimal places correspond to one pip).
- Commonly, many major FX quotes use a pip as the move in the fourth decimal place (0.0001) when prices are quoted with five decimals shown (where 0.00001 may be a “tick”). For other quote formats, pip size can differ. When in doubt, rely on the pair’s standard definition for pip size.
- Measure the price change you want to count
- Pick a reference price (for example, a start level) and an end price.
- Compute the price difference: end price minus start price.
- Convert the price difference to pips
- If one pip equals 0.0001, then:
- pips = (price difference) / 0.0001.
- If one pip equals 0.01 (a two-decimal quote convention), then:
- pips = (price difference) / 0.01.
- Connect “points” to pips using decimals
- On many platforms, the displayed movement in decimals can be treated as points (one point = one unit of the last displayed decimal increment).
- Then you convert points to pips by dividing by how many “points” equal one pip.
Example and self-checks
Assume a pair quoted with pip size 0.0001 (the fourth decimal place). If price moves from 1.2345 to 1.2355:
- price difference = 1.2355 − 1.2345 = 0.0010
- pips = 0.0010 / 0.0001 = 10 pips
If, instead, your platform’s display suggests you are counting in a different unit (for example, you accidentally used 0.00001 as if it were a pip), you might get 100 pips instead of 10. That kind of mismatch is a sign you’re using the wrong pip size.
Practical checks (independent from any account or strategy):
- Check the decimal logic: confirm how many decimal places change when you see what you believe is “one pip.”
- Use a small, clean move: try to count pips on a move that is easy to express in the quote’s decimals (like 0.0001 or 0.0010, depending on the pair).
- Consistency check: if two different methods (direct division vs. counting decimal increments) disagree, revisit the pip-size assumption.
Limitations and what can’t be guaranteed
- Thinkorswim display formats vary: what you see as decimal places, ticks, or “point” increments can differ by instrument settings and quotes. A pip count must be based on the correct pip-size definition for the selected pair.
- No universal single number: “one pip” is not always the same numeric value across all FX quote formats, so you must match the pip definition to the pair.
- This does not imply outcomes: counting pips explains measurement, not forecasting. Price movement and platform behavior do not create a guaranteed link between pip counts and future results.