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Pips, Points, OR Pippetes? Which is the correct term?

okpinoy · 8 · 2327

okpinoy

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(source:https://www.facebook.com/groups/FXFledgling/permalink/1266907193418175/)

There has been confusion to some traders about the use of the word pips, points, and pippettes. Years back, there was no points or pippettes. There was only PIPS. In 2002, when I started to trade Forex, the number of digits when playing any pair with JPY was 2 only and non-JPY was 4. Then due to the advances of technologies, trading with this number of digits became seriously problematic for brokers because intelligent traders discovered ways to beat the brokers' feed and made automated system that easily manipulate the old system and made serious money out of it at the expense of the brokers. Many brokers at that time are not admitting that they are market makers so winning traders made them suffer. Many brokers, especially the old ones would not admit that this happened during those time and would say that it's just one of those conspiracy theories. To resolve the issue, a new way of trading was introduced, they added a digit to the price quotes and created high spread and/or high commissions when price is too much volatile. Thus, this is the birth of points or pippettes. The 3rd digit and 5th digit in the price quotes are really called points, then some brokers coined the word pippettes. Worse, some brokers maybe intentionally use the word pips for the 3rd and 5th digits for marketing purposes. Imagine, when they say, our traders just earned 1,000pips but in reality it was just 1,000points, therefore it's only 100pips hehe. Clever monsters right? With regards to volatility, technically, volatility is a trader's friend. Price movement would still be easily captured by smart traders if there are tight spreads and commissions. So putting high spread when price is volatile was born.

So next time when you hear someone says that he earned 1,000pips in a few hours. Maybe what he means 1000points only.

PS It doesn't mean the current system will not be dominated by smart traders. Time will come someone will discover another loopholes to exploit to earn huge amount of dollars. (or maybe someone has discovered it already but just too quiet about it :) )
« Last Edit: Nov 29, 2018, 05:32 AM by okpinoy »



okpinoy

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okpinoy

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okpinoy

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okpinoy

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okpinoy

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you'll get confused also with your spread if you don't get this.


 


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