Best 5 Digit Forex Brokers

Many traders are confused as to how the pricing of currency pairs on 5-digit broker platforms translates into pip movements. You may also be wondering why the MT4 platform displays the profits or losses which are unrealized as a larger amount which is 10 times the actual value on the chart. It is important to understand how the price displays on 5-digit broker platforms work, especially when you will be setting stops and profit targets for your trades.

The first thing to get out of the way here is the points displayed on the bottom right corner of the chart. The reason why the MT4 will display a profit/loss which is ten times the actual price movement in pips is that the MT4 platform does not recognize fractional pip displays. What does this mean? This means that when it comes to 5-decimal pricing, the MT4 will not recognize a display such as 1.2952.2 because there is no such thing as two decimals in pricing. Rather, the MT4 will recognize that the last digit is a tenth fraction of the 4th digit and will display it as a round figure which is ten times the last digit. Therefore if you look at the snapshot below, you will see that for the two open trades, the total pip deficit for the active trades is actually -4.1 pips, but in the points display, it shows up as -41 pips: i.e. (-19 pips) + (– 22 pips) = -41pips.

It is important that the trader recognizes this so that errors are not made in setting stops. Whatever the profit or loss displayed in points is, simply divide it by 10 to get the actual pip value of the unrealized or realized profit/loss in the trade.

Similarly, you can use the same principle to determine price moves. So if on a 4-digit broker platform the price move from 1.4562 to 1.4567 is 5 pips, this will show up on a 5-digit broker platform as 1.45621 to 1.45671, or 50 pips. In the 5-digit pricing quote, any fraction from 0 to 9 may show up. So we will have a possibility of the 50-pip price move just described showing up as 1.45623 to 1.45673, 1.45624 to 1.45674, 1.45625 to 1.45675, etc. So even though the price movement shows up as a 50-pip move on a 5-digit broker platform, the movement in fact is just 5 pips.

Similarly, a price move of 54 pips on a 5-digit broker platform is actually 5.4 pips on a 4-digit platform and that is also the true value of the pip movement. So a 54-pip price move on a 5-digit broker platform is actually a move of 5.4 pips. Using the price move example just cited, a 54-pip move on a 5-digit platform is a move of 1.45623 to 1.45677, 1.45624 to 1.45678, etc.

One of the first changes that traders had to bear with was that their robots and indicators coded on 4-digit broker platforms would no longer work on the 5-digit broker platforms. Any software coded with the MQL4 language using a 4-digit pricing system would have to be completely reconfigured. Fortunately, an army of programmers who can perform the reconfigurations has arisen. Therefore, any trader with software programmed for 4-decimal trading can get a programmer to reconfigure this software to perform 5-digit trading.

The 5-decimal pricing system also introduced some changes as to how brokers priced their assets. Prices are delivered from various price feeds and this has a bearing on the spreads that are offered by individual 5-digit brokers. Any trader who wants to start trading on the 5-digit broker platforms would have to carefully select the broker platforms to be used for this purpose. Furthermore, traders must be able to interpret the price movements and know the implications for profit and loss in their trades.

An aspect of 5-digit forex trading is the fact that it has made it possible to be able to use automated trading algorithms to get precise entries and exits, especially during news trades. It is possible for a trader to use high-frequency trading software to get specific targets for entry and exit. For instance, a trader may want to make $5,400 from a 5.4 pip movement, which displays 54 pips on the 5-digit broker platform. This will entail trading 100 lots of a currency with an entry of say, 1.56432 to 1.56476. Knowing that there are other traders around the world who may not have access to this software, this trader can with a high-frequency software, get an entry at 1.56432 and be able to sell off the position to another trader who the broker fills in at 1.56476, thus delivering the 5.4 pips target.

5-digit trading is now the norm in forex trading and using the information put up in this article, traders should be able to make better sense of what has hitherto been a mysterious price quotation system on their platforms.