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Converting FX Pip Values Between Currency Pairs

Article Quant Q&A · Author: Mostdoisneverdone
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Summary

The document explains how to compare pip moves in two currency pairs that share the same base currency. It frames the calculation in terms of profit and loss: for a fixed base-currency trade size, the same pip move produces the same amount in the quote currency, while conversion back to the account’s base currency depends on the relevant spot rate. The example compares EUR/USD and EUR/CNH and illustrates how the relationship between their quote currencies provides a conversion ratio.

The method is to convert the quote-currency P&L into the desired account currency using the applicable exchange rate, rather than compare pip counts in isolation. The example also presents an approximate shortcut based on the relative exchange rates. This relationship depends on the pairs’ quote currencies, trade size, pip definition, and conversion rate at the time of the transaction. The note does not discuss spreads, contract specifications, or changes in conversion rates after the trade.

Key ideas

  • A pip count alone does not determine comparable P&L across different currency pairs.
  • For a fixed base-currency notional, pip P&L is first expressed in the pair’s quote currency.
  • Convert quote-currency P&L into the account currency using an applicable exchange rate.
  • The relationship between quote currencies can provide a ratio for comparing pip values.
  • The conversion depends on trade size, pip conventions, and the exchange rate used.

Tags

ForexPosition sizingStatistics
Full text
# PIP Value conversion - How can I convert my Pips? general formula


# PIP Value conversion - How can I convert my Pips? general formula












So I was wondering, how I can convert for example a 20 pips charge is(Spot: 1.0250 with pips 1.0270) on EURUSD into EURCNH Pips with (Spot EURCNH at 7.3005). Is there a general formula and short-cut?

Thinking from Trader perspective and someone wants to buy

Thank you very much in advance!

## Answer by Xomuama (score 1, accepted)

https://quant.stackexchange.com/a/73767

Let's consider your treasury account is in EUR (you have to change your P&L on a spot transactions into EUR each time). Let's suppose this is done at the current spot price in the market, following your transaction. Let's consider the below example :

Suppose a FOR/DOM quotation (1 units of FOR accounts for S units of DOM, FOR is EUR, DOM is USD or CNH). 20 pips in EUR/USD change over 1mio EUR returns a P&L of 2000 USD, or 1951.22 EUR if converted at 1.0250 to get your treasury back in EUROS.

20 pips in EUR/CNH over 1mio EUR returns a P&L of 2000 CNH, or 273.97 EUR if converted at 7.3000 to get your treasury back in EUROS.

Therefore, you can easily see that the P&L in the DOM (alternative, priced currency) is the same : 2000 units, but what changes is to spot rate you will use to get back in FOR currency.

Notice : 7.3000 / 1.0250 = 7.1220 gives you the USD/CNH rate, which is the link between your two P&L, you can see it as a ratio, or non-arbitrage equivalence between both.

So 20 pips in EUR/USD <=> 20pips in EUR/CNH * 7.1220. So a spread of 0.01424 pips in EURCNH, is equivalent to 20 pips in EUR USD.

To make it even shorter, think that CNH has a lower value against EUR and the FX rate is approx 7 times higher, so you need to take 7 times the same spread to get the same P&L.

If you were trying to convert EURUSD pips into EURNOK pips, i would tell you to take approximately 10 times the spread (so 200 pips on en EURNOK transaction)

I hope it is clear

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.