What is a ‘Nickel’
In foreign exchange (FX) market Nickel is a slang that means five basis points (pips), or five-hundredths of a percentage point (0.05%). This term also indicates the metal unit of U.S. currency.
In the financial markets traders use slang terms, such as Nickel refer to small changes in the interest rate. Slang terms are standard, especially in markets like Forex or sovereign debt, where such small shifts routine.
Breaking down the ‘Nickel’
Nickel for five basis points (pips), usually used by Forex traders to refer to changes in interest rates by the Central Bank. In addition, it may indicate changes in the value of the currency during the trading session. Forex indicators are usually expressed in whole number format and use four decimals and not using fractions for residues.
For example, usd/eur Currency quote will look like 1.2512. Adjustment Nickel up will lead to increased Quote 0.0005, since each basis point is 0.0001. The new rate will be 1.2517.
The effect of Nickel on profit and loss
Basis points pips to help investors calculate profits and losses throughout the trading session. Foreign exchange rates list currency pairs that describes the price of one currency to another.
For example, imagine that a foreign exchange trader thinks that the value of the Euro (EUR) can grow towards United States dollar (USD) in daily trade. The pair of lists in the EUR/USD 1.2100. This price is 1.21 Euro will be exchanged for one U.S. dollar. A trader buys EUR 100 000 at a price of $121,000.
A few hours later, the value of the Euro/dollar rose to 1.2105, the addition of Nickel, or 5 pips cost. The trader bought 100,000 euros brought profit in the amount of 0,05%, to about $60. The trader, at the moment, converts euros to dollars. If the Euro falls against the dollar, a person can still make a profit, keeping the currency in euros rather than convert them into dollars, and then sold them at a later time.
The calculation of the cost of Nickel
Traders can calculate the value of 1 point when dividing 1 PIP, or 0.0001, the rate, and then multiply that number by the amount of money a trader wants to invest. If the dollar/Euro is $1.30, and the investor wants to spend $100,000, 1 PIP equals 0.0001, divided by 1.30, and then multiplied by 100 000$. The value of one PIP on this transaction is approximately 7.69 $(0.0001 / 1.30 x 100 000 = 7.69).
After the trade, investors can easily determine the profit or loss by multiplying the pips by 7.69$. If the exchange rate rose 100 pips, the man makes $769 to trade. Items always change depending on currency and amount of money invested in the trade.
Outside the foreign exchange market, the term can also mean the Type of metal and the unit of U.S. currency, which is 5/100 of a dollar.