How to calculate "pips" of Cashback Rebate?

Cashback when it comes to Forex market, is all about cutting off the pip cost.

Pip is the unit used to calculate the spread which is the difference between bid price and ask price.

In this article, we explain how to cancluate the pips.

How to calculate pips and spreads?

Determining profits and losses is an important part of trading, so let's take a closer look at how pips and spreads work. 

Pips are the smallest price fluctuations an asset can generate. 

In the Forex market, currency pairs are represented by four decimal points, so a change of 0.0001 is equal to one pip. 

For a circle pair indicated by two decimal points, one pip is equal to 0.01.

Example 1

A rise in the euro / dollar from 1.3400 to 1.3500 reflects 100 pips, and a fall in the pound sterling / dollar from 1.3450 to 1.3400 shows a change of 50 pips. The US dollar / Japanese yen rising from 94.50 to 95.75 is converted to an increase of 125 pips. The Australian dollar / Japanese yen falling from 78.50 to 76.00 means a 250 pip fall.

Spreads, on the other hand, are the difference between bid and ask prices. The bid price is the rate that a broker or market participant buys from a trader, and the ask price is the rate that a trader sells to. Bid prices are generally set higher than the actual market rate, and ask prices are set lower than the actual market rate.

Example 2

For example, if the Euro / USD spot rate is 1.3450, the broker can estimate the bid price at 1.3455 and the ask price at 1.3445, and the bid-ask spread will be 10 pips. Euro / AUD bid / ask values ​​of 1.4500 / 1.4520 are converted to 20 pips spreads. Wide spreads are often preferred because wide spreads can reduce trading profits or increase losses. For ease of calculation, spreads are shown as 10 or 20 pips.

When calculating potential profits and losses, remember to apply the appropriate price to see if the reward / risk ratio probably indicates that it is worth doing a particular setup. Spreads also affect bottomline profitability, especially for day traders who hold multiple positions a day. These spreads also apply to stocks, commodities, indicators and futures.

Brokers with fixed spread cost

In these years, many online Forex brokers offer highly competitive tight spreads on tradable financial products such as Forex, Commodities, Metals, Indicators, and Cryptocurrencies.

Some brokers may also have fixed spread.

This ensures broker transparency without worrying about the additional costs of slippages. 

With this method, you can also calculate potential risks and rewards from the start, because the price you click is the price you get. 

Risks are inherent in any investment. Make sure you understand the cost of trading as well as the risk of trading.