Basis point, usually referred to as “points” (PIPS), the minimum unit of change is 1 basis point, that is, the change of the last number in the exchange rate. Each change of 1 unit is called a change of foreign exchange basis point.
For example, if the exchange rate of EUR/USD changes from 1.2160 to 1.2161, then the exchange rate of EUR/USD increases by 1 basis point.
Except that the second digit after the decimal point is 1 basis point (for example, when the exchange rate of USD/JPY changes from 116.30 to 116.29, then the exchange rate of USD/JPY decreases by 1 basis point), the fourth digit after the decimal point is used as the calculation basis of 1 basis point.
It is worth noting that according to market practice, the price of foreign exchange is usually composed of significant digits including the “4” and “2” digits after the decimal point. However, in recent years, many price representations of foreign exchange rates including the “5” and “3” significant digits after the decimal point have been introduced.
The “5” and “3” decimal places are called fractional basis points, or one-tenth of a foreign exchange basis point.
For example, if the exchange rate of EUR/USD changes from 1.21600 to 1.21601, then the exchange rate of EUR/USD increases by 1 fractional basis point.
If you want to make money, you must learn how to calculate the basis value of foreign exchange. Here are some examples (here we use the standard “4” and “2” digit notation).
1. When USD is used as the basic currency, the calculation formula of one basis point of foreign exchange is as follows: basis point of foreign exchange =.0001¡Â Currency exchange rate for example:
The exchange rate of USD/CHF is 1.2020, so the base point value of USD/CHF =.0001¡Â1.2020=0.0000819 The exchange rate of USD/JPY is 123.15.
Then the basis point value of USD/JPY is.01¡Â123.15=0.00008122. When the US dollar is used as the relative currency in the currency pair, such as AUD/USD;
GBP/USD;
EUR/USD 1 basis point value is approximately equal to: 0.0001.
We usually do not need to calculate this foreign exchange basis point value, because all the traders will calculate them for you.
Still, there is no mistake-knowing how to calculate basis points.
Gold rose as the dollar rallied and oil tumbled 6 percent, awaiting guidance from the nonfarm report.
Please pay attention to the specific operation, the market is changing rapidly, investment needs to be cautious, the operation strategy is for reference only.
