Benifits of trading with fractional pipes
At FxGravity, as of 3rd May 2015, we will quote all our currency pairs to 5 decimal places, or in the case of the JPY pairs and crosses to 3 decimal places. The reasons for this are numerous but most importantly it allows for our traders to trade tighter and more accurate spreads.
Key advantages of Trading with 5 Decimal Places:
- Facilitates the tightening of spreads even further
- Enhances competitive transaction costs
- Provides better liquidity with less slippage
- Offers more accurate spreads
In the past a 1 pip move (number sitting the furthest to the right of the decimal point) was the smallest price change that a pip could make. Without 5 decimal or also known as fractional pip pricing, the buy price is rounded up to the nearest pip, and the sell price is rounded down. For example if the Euro is trading at 1.2254 a move to 1.2255 would be a 1 pip increase in the quote and a move to 1.2253 would be a 1 pip decrease.
With 5 decimals for example the EUR would appear as 1.22542 instead of 1.2254. We can call the last decimal place in this example a fractional pip or a tenth pip.
With the JPY currency pairs there are two decimal points because the JPY quotes as USD 1 per 100 Yen, and not per 1 Yen. For example if the Japanese Yen is currently trading at 79.22 a move to 79.23 would be a 1 pip move up in the market and a move to 79.21 would be a 1 pip move down in the market. With 3 decimals we would see the trading price for JPY currently at 79.224.
Should you require any clarifications or have any questions please feel free to contact our customer service team by email on CS@FxGravity.co.uk
What are the advantages of fractional pips?
- Lower spreads for some major and popular currency pairs
- More competitive transaction costs
- Experience more accurate and tighter-spread
- Receive better liquidity with less slippage
Will my Expert Advisors be affected by a fractional pip?
Most Expert Advisor’s will be influenced by the introduction of a fractional pip or a 5th decimal pip. In order for your Expert Advisor to be placed in line with this change you should adjust your take profit / stop loss settings. Remember to also amend any other pip value settings which could be affected; this can be done by multiplying your current levels by 10. For example, if you have now got your stop loss level set at 20 pips and a take profit level at 40 pips on each trade, you must change your take profit level to 400 and your stop loss level to 200 in order for your Expert Advisor to work alongside the new pricing structure.
We also recommend you test the new version on a demo account before using it on your Live Account.
Will my charts be affected by the introduction of the fraction of a pip?
Yes you should close existing charts on your MT4 and open new ones when working with fractional pips. Any lines or indicators in use should be removed and re-drawn.
Will my open positions be affected?
No open positions and orders will not be affected when switching from 4 to 5 decimal pip trading.
Who can I contact with questions concerning fractional pip trading?
Please do not hesitate to get in touch with any questions; our international highly-experienced customer service team are always here to help. Email on: CS@FxGravity.co.uk