What is Breakeven?

Breakeven is an element that generates the condition when the price returns to the level of entry of an order, after achieving a target of pips in the direction of the market.

Break even means that if we use it as an exit signal, the level of losses is 0€. Our equilibrium is that we do not either loose or win.

To understand this concept, there is an example in the following graph:

 

Suppose that we open a buyout, with a level of initial losses drawn in red and a level of profit drawn in green.

At some points, the orders makes a great increase but they do not reach the targeted profit and they turn down and close in loses.

Considering a good usage of the break even, we can define the orders such that when they reach that point we can change our exit rule.

When the blue line (breakeven) is reached, we have defined a new exit rule in the entry price of the order. By this, if the price turns around we do not obtain loses anymore but we exit the market with a profit / loss of 0.

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