Trading synthetic indices has rapidly gained popularity among traders in the UAE, largely because of their 24/7 availability and independence from the traditional market news. However, if you want to succeed in trading these instruments, it’s crucial to understand pip calculations.
In this article, we explore how to calculate pips in synthetic indices in a clear and practical way while keeping in mind the UAE trading environment.
What are pips in synthetic indices?
A pip represents the smallest shift in price that an instrument can make based on its quoted value. Although people commonly associate pips with forex, they also apply to synthetic indices, but the calculation method can vary slightly depending on the index and trading platform.
Traders in the UAE often find synthetic indices appealing because they are not influenced by regional economic announcements or global trading sessions. As such, pip tracking is a core skill for managing trades consistently.
A look at the pricing of synthetic indices
Typically, synthetic indices are quoted with decimal places. The pip size is dependent on the number of decimal places the index uses:
· If quoted to one decimal place, one pip is often 0.1
· If quoted to two decimal places, one pip is typically 0.01
Before you can place a trade, always check the contract details on your platform. This step is crucial to avoid confusion when calculating your potential gains or losses.
Step-by-step guide on calculating pips on synthetic indices
If you’re looking to understand how to calculate pips on synthetic indices, use the following simple steps:
· Identify the entry price
· Define the exit price
· Deduct the entry price from the exit price
· Divide the result by the pip value of the index
Example:
Taking an entry price of 1250.50 and an exit price of 1252.00, the price movement will be 1252.5 minus 1250.5, which is 1.50. If 1 pip = 0.01, then 1.50 ÷ 0.01 =150 pips. The same logic applies as you are learning how to calculate synthetic indices pips across different instruments.
Using trading platforms to track pips
Many modern trading platforms automatically display pip movement, a very helpful feature for traders managing multiple positions. Platforms supported by brokers such as Weltrade, offering synthetic indices often come with built-in calculators and real profit/loss displays. Such platforms offer detailed specifications and user-friendly tools that can simplify pip calculations for traders operating from the UAE.
The importance of pip calculation for UAE traders
Here are some of the ways pip calculations help UAE-based traders:
· Set realistic stop-loss and take-profit levels
· Manage risk according to the account size
· Compare performance across different indices
Given that synthetic indices run continuously, pip awareness helps traders to maintain discipline during late-night or weekend trading sessions, which are common among UAE traders.
Conclusion
Understanding and mastering how to calculate pips in synthetic indices is a foundational skill that affects trading decisions. What traders in the UAE need to understand is pricing formats and apply simple math. They also need to use reliable platforms so they can approach synthetic indices with greater confidence and clarity. After trading for a duration, the knowledge gained supports steadier decision-making and improves trade evaluation across different market conditions.
Apart from that, if you are interested to know about Oil Trading in the UAE then visit our UAE Market category.
