Break-even

Break-even is the price a trade must reach to cover its costs. Because you buy at the ask and sell at the bid, and may pay commission and swap, a trade closed at the entry price usually shows a small loss. The true break-even point is a little further on.

The term is also used for a common trade-management step: "moving the stop to break-even", which means shifting the stop-loss to the entry price (or just beyond it) once the trade has moved in your favour.

Example

Illustrative figures: you buy one standard lot of EUR/USD at an ask of 1.0850. The account charges a round-turn commission of $7 a lot, which is 0.7 pips at $10 a pip.

• To close at zero, the bid must rise to roughly 1.0850 + 0.7 pips, about 1.08507.
• If you hold overnight and pay a swap of $5, break-even moves out another 0.5 pips, to about 1.08512.
• If you move the stop to exactly 1.0850 and it is hit, you close at a loss of about $7 (or $12 with the swap), not zero.

Practical notes

• Break-even stops have a cost. Moving the stop too early can turn trades that would have worked into small losses, because normal price swings reach the entry price again. Whether it helps depends on the strategy; a backtest or journal can show the effect.
• Slippage can still apply. A break-even stop is a normal stop order and can fill worse in a gap.
• Win rate needed to break even is a different but related idea: with a 1:2 risk-reward ratio, you break even over many trades by winning one in three, before costs.

The profit and loss calculator shows how costs shift the numbers.