Pips and Pipettes in Forex Trading

[Suba]

In forex trading, we encounter the terms "pips" and "pipettes," both of which every forex trader should understand. Pips can be defined as the price change in a currency pair we are trading. For example:
If we choose the EUR/USD (or €/$) pair and it moves from 1.2400 to 1.2403, this change is considered three pips (0.0003).
If we take a BUY position on the EUR/USD pair, we are buying EUR and selling USD. Conversely, if we take a SELL position, we are selling EUR and buying USD.

Pipettes are similar to pips, referring to changes in the value of a currency pair, but they are smaller in value. 1 pip equals 10 pipettes. For example, if the USD/CAD pair initially shows 1.30016 on the chart, then changes to 1.30018, a change of 2 pipettes occurs.
What causes pips to fluctuate in forex?

 

[gwolf666]

In the currency market, the Pips fluctuate mainly due to the constant interaction between the supply and demand of each currency. These movements actually reflect the pulse of the world economy and the perception that investors have on the value of a currency at a given time. One of the most decisive factors are economic news, such as the publication of employment data, inflation or decisions on interest rates of central banks. When a country announces an increase in rates, for example, it usually attracts foreign capital and strengthen its currency, generating movements in associated peers.
Another key point is political and geopolitical events. A conflict, an unexpected choice or even rumors of instability can cause traders to react immediately, which translates into sudden changes in pips in seconds. Pure speculation also plays an important role: large funds and banks carry out large volume operations that can move the market and cause notorious fluctuations.
Finally, liquidity and negotiation schedules also influence. During active sessions, such as London or New York, there is usually more volatility and, therefore, greater movement in the Pips. In short, each PIP that moves responds to a complex set of economic, political and behavioral factors of the market.