Forex Education

Trading industry knowledge. Learn forex trading, investing in stocks, commodities.

  • Home
  • Choose a broker
  • Best Forex Brokers
  • Learn trading
  • Affiliate
  • Contact
  • About us
You are here: Home / Education / What Does Break Even Mean in Forex? – Break Even in Options

What Does Break Even Mean in Forex? – Break Even in Options

by Fxigor

Table of Contents

  • What Does Break-Even Mean in Forex?
  • Break-even percentage calculation
  • What does break even mean in options? 
  • Application of the break-even percentage
  • Setting the right target.

What is break-even?
The break-even point in business is the point at which total cost and total revenue are equal, in other words, “even.” To calculate the break-even point in business, you need to divide your total fixed costs by the difference between the unit price and variable costs per unit.

But, in trading, we have a break-even term too.

VISIT OANDA - APPLY $10.000 Bonus
BEST BROKERS REVIEWS
avatrade ad gold trading
Trillion Dollar Club - Invest & Trade Stocks, Crypto, Forex
trade oil ads
cfd stocks trade - ad
avatrade ad gold trading
avatrade ad gold trading

What Does Break-Even Mean in Forex?

Break-even in forex means that your trading position neither makes nor loses money. So, for example, if you buy EURUSD at a 1.3120 price level and then you a close position at 1.3120 price level with zero profit and zero dollars loss, you are break even.

VISIT OANDA - APPLY $10.000 Bonus
avatrade ad gold trading
Trillion Dollar Club - Invest & Trade Stocks, Crypto, Forex
trade oil ads
cfd stocks trade - ad
avatrade ad gold trading
avatrade ad gold trading

BEST BROKERS REVIEWS
free course banner

fxpro android ad
fxpro android ad
100% bonus hotforex
100% bonus hotforex
trade ETF
supercharged bonus hotforex ad
hfm zerpo spread ad
gold trading hotforex ad
crypto trading capital ad
trade oil ads
cfd stocks trade - ad
avatrade ad gold trading
exness stable spread ad
trade metals ad
trade crypto icm

Usually, breakeven in trading works when you move from your first stop position into your original entry position once the price has moved in your favor.

VISIT OANDA - APPLY $10.000 Bonus

Break-even example in forex trading:

  1. You buy EURUSD at 1.3120
  2. Price goes to 1.32 level.
  3. You set stop loss at 1.3120 (break-even level).
  4. If the price falls to 1.3120, you will have zero profit and loss, and you will break even.

The percentage for break-even while trading is a valuable statistic because it shows how often the trader has to win to break even. This will help in decision-making. He will use different stop losses to manage the risk and set targets for the rewards he wishes to achieve. For a break, even the trader does not make money and does not lose money, though he is investing his time. If the number of trades won is higher than the break-even percentage, the trader makes a profit. If the percentage of trades won is lower than the break-even calculated, the trader is losing money.

avatrade ad gold trading
Trillion Dollar Club - Invest & Trade Stocks, Crypto, Forex
trade oil ads
cfd stocks trade - ad
avatrade ad gold trading
avatrade ad gold trading

Break-even percentage calculation

To calculate break-even percentage in forex trading, you need to divide stop loss and  stop loss and target price sum like in the following formula:

VISIT OANDA - APPLY $10.000 Bonus
BEST BROKERS REVIEWS

VISIT OANDA - APPLY $10.000 Bonus

avatrade ad gold trading
Trillion Dollar Club - Invest & Trade Stocks, Crypto, Forex
trade oil ads
cfd stocks trade - ad
avatrade ad gold trading
avatrade ad gold trading

free course banner
fxpro android ad
fxpro android ad
100% bonus hotforex
100% bonus hotforex
trade ETF
supercharged bonus hotforex ad
hfm zerpo spread ad
gold trading hotforex ad
crypto trading capital ad
trade oil ads
cfd stocks trade - ad
avatrade ad gold trading
exness stable spread ad
trade metals ad
trade crypto icm

Breakeven= (Stop-loss/(Target + Stop-loss)) X 100

For calculating the break-even percentage for a particular trading strategy, the settings for stop-loss and target defined by the trader are considered. Different parameters are used for measuring the target, stop-loss, like ticks for futures trading, cents for stocks, and pips for forex trading. In other cases, the amount of money is used for specifying stop loss and target profit. The calculation shows the number of winning trades for break-even in percentage terms.

VISIT OANDA - APPLY $10.000 Bonus

Many traders do not use the same target or same stop-loss for each trade. In these cases, the average profit or win and average loss for the different trades are considered for calculations. Thus, the average stop-loss is the average loss, while the average profit becomes the average target. The estimate for the break-even percentage is provided below.

What does break even mean in options? 

In options trading, the break-even price can be Call Breakeven or Put Breakeven as the price at which investors can choose to exercise or dispose of the contract without incurring a loss. In the case when a trader buys an option, call position you own can be profitable at expiration, If remains above the strike price plus your initial investment:
Call Breakeven = Call Strike Price + Call Purchase Premium
In the case when a trader sells an option, “Put position,” you can be profitable at expiration if it remains below the strike price minus your initial investment:
Put Breakeven = Put Strike Price – Put Purchase Premium

Break-even options trading example:
For example, if you have a call option with a strike price of $40 and your cost per option share is $1.50. Adding $1.50 to $40 tells you that your breakeven price is $41.50.
For example, if you have a put option with a strike price of $40 and your cost per option share is $1.50. Then, subtracting $1.50 to $40 tell you your breakeven price is $38.50.

avatrade ad gold trading
Trillion Dollar Club - Invest & Trade Stocks, Crypto, Forex
trade oil ads
cfd stocks trade - ad
avatrade ad gold trading
avatrade ad gold trading

VISIT OANDA - APPLY $10.000 Bonus

avatrade ad gold trading
Trillion Dollar Club - Invest & Trade Stocks, Crypto, Forex
trade oil ads
cfd stocks trade - ad
avatrade ad gold trading
avatrade ad gold trading

fxpro android ad
fxpro android ad
100% bonus hotforex
100% bonus hotforex
trade ETF
supercharged bonus hotforex ad
hfm zerpo spread ad
gold trading hotforex ad
crypto trading capital ad
trade oil ads
cfd stocks trade - ad
avatrade ad gold trading
exness stable spread ad
trade metals ad
trade crypto icm

Application of the break-even percentage

The break-even percentage determines whether the trading strategy formulated will provide sufficient winning trades. The trader is making a profit, using different settings for stop-loss and targets. It will help if the trader is using a new trading strategy; it will help determine the number of trades required to profit when the stop-loss and target settings are optimized. The trader winning a more significant percentage of trades than the break-even will profit, while a trader losing a more substantial number of trades compared to break-even will make a loss.

The win rate and risk/reward ratio are calculations related to the trade. The risk/reward compares the risk for each trade with the reward targetted. The win rate calculates the number of trades that the trader is winning, expressed in percentage terms. These calculations and statistics can complement the trader’s break-even calculation to decide and formulate the right strategy.

Setting the right target.

Traders should be aware that setting targets that cannot really produce break-even percentages is misleading because they are not realistic. A trader may feel tempted to set the target significantly higher than the stop-loss, thinking that he will require only a few winning trades to break even under these conditions. Yet, the trader is not aware of the reality of achieving difficult targets. If the target is extremely high, the trader will never achieve it since the prices or value of the security will not increase to a very great extent in most cases. In other cases, there will only be very few winning trades for high targets, so the trader will lose money since the percentage of losing trades will be more.

So while developing a trading strategy or system, the trader should first determine the target profit, stop-loss levels that are realistic, easily achieved, and then calculate the break-even levels. Though most beginners are happy to break even when they start trading, traders should be aware that their goal is to make a reasonable profit since they are spending time and taking the risk of investing their money. At the same time could be utilized elsewhere to make some money with far lower risk. Hence the trader should aspire to win more trades compared to the break-even he has calculated. Thus, the trader’s first target has to achieve while perfecting his trading strategy is not the ultimate goal for profitable trading.

  • Author
  • Recent Posts
Fxigor
Fxigor
Trader at Leanta Capital
Igor has been a trader since 2007. Currently, Igor works for several prop trading companies.
He is an expert in financial niche, long-term trading, and weekly technical levels.

The primary field of Igor's research is the application of machine learning in algorithmic trading.

Education: Computer Engineering and Ph.D. in machine learning.

Igor regularly publishes trading-related videos on the Fxigor Youtube channel.

To contact Igor write on:
igor@forex.in.rs
Fxigor
Latest posts by Fxigor (see all)
  • Are Precious Metals a Good Hedge Against Inflation?
  • Are Precious Metals a Good Long-Term Investment?
  • Are Precious Metals Taxable?

Related posts:

  1. 3 Line Break Chart – Download 3 Line Break for MT4
  2. Binary Options vs. Forex – Case Study
  3. Options Trading vs Forex Trading
  4. Can You Get Rich With Options Trading?
  5. TD Ameritrade Options Approval
  6. Straddle vs. Strangle Options
  7. Can You Make Passive Income From Options?
  8. What Happens When you Exercise a Call Option? – Exercise Options
  9. What is Twin Trading in Forex
  10. How to Fix Invalid Stop Loss or Take Profit in MT4?
  11. How Much Money Do I Need to Day Trade Forex?

Filed Under: Education

Trade gold and silver. Visit the broker's page and start trading high liquidity spot metals - the most traded instruments in the world.

Trade Gold & Silver

Diversify your savings with a gold IRA.

Gold & silver portfolio-building assistance from product professionals.

VISIT GOLD IRA COMPANY If you want to trade stocks try: TRADE IDEAS

fxpro android ad
fxpro android ad
100% bonus hotforex
100% bonus hotforex
trade ETF
supercharged bonus hotforex ad
hfm zerpo spread ad
gold trading hotforex ad
crypto trading capital ad
trade oil ads
cfd stocks trade - ad
avatrade ad gold trading
exness stable spread ad
trade metals ad
trade crypto icm
VISIT OANDA - APPLY $10.000 Bonus

Website categories

Main Forex Info

  • Forex Calendar 2022
  • Forex Holidays Calendar 2022 – Holidays Around the World
  • Non-Farm Payroll Dates 2023.
  • Fed Meeting Schedule 2023. Dates! – FOMC Dates
  • Key Economic Indicators For a Country
  • What is PAMM in Forex?
  • Stock Exchange Trading Hours

Main navigation:

  • Home
  • About us
  • The Best Forex Brokers of 2023 (Ranked & Reviewed)
  • Free Forex Account Without Deposit in Autumn of 2023.
  • Best Forex Affiliate Programs in 2023.
  • Best Forex Brokers by Monthly Traffic of 2023
  • Brokers That Accept PayPal Deposits
  • Forex brokers reviews
  • Investment
  • Education

Forex social network

  • RSS
  • Twitter
  • FxIgor Youtube Channel
  • Privacy Policy
  • Contact us

Spanish language

Spanish language website
Risk Warning: Trading leveraged products such as Forex and CFDs may not be suitable for all investors as they carry a high degree of risk to your capital. Trading such products is risky and you may lose all of your invested capital. Before deciding to trade, please ensure that you understand the risks involved, taking into account your investment objectives and level of experience.

Copyright Forex.in.rs 2007

Privacy Policy