What is Breakeven?

Breakeven is an element that generates the condition when the price returns to the lentry level 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 lose 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 make a great increase but they do not reach the targeted profit and they turn down and close in losses.

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 losses anymore but we exit the market with a profit/loss of 0.