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Example 1: Going Long on NZD/USD

This is the easiest way to calculate pip value in Dollar. You can generalize this example to any USD pair that USD is the quote currency.

Let's assume that we buy NZD/USD at 0.6856 (which means we go long) and then we close the trade when the price has reached 0.6857. As you can see this trade generates 1 pip in profit (i.e. 6857-6856=1). When you purchase a standard lot of NZDUSD it means that you need to purchase 100000 NZDUSD. Since the price at the time of purchase has been 0.6856 you have actually paid 68560 USD for this contract (i.e. 100,000x0.6856). When you close the contract you gain 68570 USD (i.e. 100,000x0.6857). This means that your overal profit would be $10.00.

We can generalize this calculation for any currency pair that the quote currency is USD. Every pip in such trades is equivalent to...

$10 x Number of Lots

So if you trade 3 lots and you make 1 pip then your realized profit would be $30.00 (i.e. $10x3). If you trade 1 mini lot then your profit woudl be $1.00 (i.e. $10x0.1). If you trade 5 micro lots then your profit would be $0.05 or rather 5 cents (i.e. $10x0.05).

You may expand this forumla as follows:

Profit in USD=10 x Number of Lots x Number of pips gained or lost

I need to emphasize that this formula is only valid for those currency pairs that USD is the quote currency and also the account currency of denomination is USD. You may use the same concept for short trades. The only difference is that you make money in a short trade if the price drops.