Direct answer
Pip value is the monetary value, in your account currency, of a one-pip price move for a specific FX instrument. For a “CAD and Oil” idea, the instrument you trade is what matters: CAD can appear as the base or quote currency in an FX pair, and “Oil” exposure typically comes from an instrument whose price is linked to an oil benchmark. The calculation is always the same model: pip size × position size (in lots/units) gives a value in the instrument’s price currency, then you convert that value into your account currency using the applicable exchange rate.
Mechanics: the calculation model
1) Define the pip and pip size
A pip is a standardized unit of price movement used in FX quoting. The pip size depends on how the instrument is quoted.
- A common FX convention is: 1 pip = 0.0001 for most pairs quoted to 4 decimals.
- Some instruments use different conventions (for example, 1 pip could be 0.01 when quoted to 2 decimals). You must use the pip size that matches the instrument’s quote format.
Assumption for the example math below: pip_size = 0.0001 (a typical 4-decimal FX quote).
2) Convert position size to “units”
Most FX platforms express size in lots.
- A common convention is 1 standard lot = 100,000 units of the base currency.
- Some venues offer mini/micro lots, which scale linearly.
Let:
- L = lot size (in standard lots)
- U = position units = 100,000 × L (under the standard convention)
3) Compute pip value in the instrument’s price currency
Pip value depends on whether the price move represents how much of the base currency changes or how much of the quote currency changes. For a typical FX pair formatted as BASE/QUOTE, with BASE being what you buy/sell and QUOTE being the quoted currency:
- If the pair is BASE/QUOTE, a one-pip move usually changes the value of 1 unit of BASE by approximately pip_size × (1 QUOTE currency per BASE unit).
- For a position of U units of BASE, the value change in QUOTE currency is:
pip_value_quote = U × pip_size
This works cleanly under the standard FX interpretation where the pip is applied to the quoted rate and where pip_size corresponds to the quote’s decimals.
4) Convert from quote currency to account currency
If your account currency is the same as the quote currency, then:
- pip_value_account = pip_value_quote
If not, you convert using the FX rate that links the quote currency to your account currency. A general conversion form is:
- pip_value_account = pip_value_quote × (rate_account_per_quote)
The direction matters:
- If you need “account currency per quote currency,” use a rate expressed that way.
- If you only have the inverse rate, divide instead of multiply.
5) Handling “CAD and Oil” exposure
For CAD: the core idea is still pip value for an FX instrument where CAD is either BASE or QUOTE.
- If CAD is part of an FX pair, you apply the same BASE/QUOTE steps.
For Oil: oil-linked instruments are not always FX pairs, but many trading platforms express them in a similar “price currency” model. In general terms:
- Find what currency the instrument’s price move is valued in (the “price currency”).
- Multiply by pip size and position size to get a value in that price currency.
- Convert into account currency using the appropriate FX conversion.
Because contract specs vary, you must use the platform’s contract unit and pip (or smallest tick) definition for the oil-linked instrument.
Evidence or example (with explicit assumptions)
Example A: CAD as quote currency (account currency differs)
Assume an FX pair BASE/CAD (CAD is the quote currency), standard pip convention 0.0001, and 1 standard lot = 100,000 units.
- Position: L = 1.0, so U = 100,000
- pip_size: 0.0001
Then:
- pip_value_quote (CAD) = U × pip_size = 100,000 × 0.0001 = 10 CAD per pip
If your account currency is USD, you convert:
- pip_value_account (USD) = 10 CAD × (USD per CAD)
You must use the exchange rate with the correct direction (USD per CAD).