What Is the Breakeven Point (BEP)?
The breakeven point (break-even price) for trade or investment is determined by comparing the market price of an asset to the original cost; the breakeven point is reached when the two prices are equal.
For example, if you buy GBP/USD at 1.4050 and then close the position at 1.4050 with zero profit and zero loss, you “break even.”
Some traders like to move their initial stop-loss price to the original entry price once the current price has moved in their favor.
Here’s a real-world example:
- You buy GBP/USD at 1.4050
- You set an initial stop loss at 1.4010.
- Price rises to 1.4090.
- You change stop loss to 1.4050 (breakeven level).
- If the price falls back to 1.4050, your trade neither makes a profit nor a loss. It is a breakeven trade.
How to Calculate Breakeven Percentage
To calculate the breakeven percentage, here’s the formula:
Breakeven % = (Stop Loss / (Profit Target + Stop Loss)) x 100