Trading Break Even Calculator
'/%3E%3Ccircle cx='48' cy='39' r='19' fill='%23f2c9a5'/%3E%3Cpath d='M27 35c3-16 39-17 42 2-8-8-27-9-42-2z' fill='%23374151'/%3E%3Cpath d='M21 86c5-24 49-28 56 0z' fill='%232563eb'/%3E%3Ccircle cx='41' cy='41' r='2' fill='%23111827'/%3E%3Ccircle cx='55' cy='41' r='2' fill='%23111827'/%3E%3Cpath d='M42 52c4 3 9 3 13 0' stroke='%2392400e' stroke-width='3' fill='none' stroke-linecap='round'/%3E%3C/svg%3E)
Reviewed by Calculator Editorial Team
Understanding your trading break-even point is crucial for managing risk and maximizing profits. This calculator helps you determine the exact price level where your trade becomes profitable, considering both entry and exit costs.
What is a trading break-even point?
The break-even point in trading is the price level at which your trade becomes profitable, covering all costs including entry and exit fees. It's calculated by adding your entry price to your total costs per share and then adding your commission.
Key Concepts
- Break-even price = Entry price + Total costs per share + Commission
- For long positions, you want the price to rise above break-even
- For short positions, you want the price to fall below break-even
Traders use this calculation to set appropriate stop-loss and take-profit levels. A well-placed break-even point helps ensure you only take profitable trades while minimizing losses on unprofitable ones.
How to calculate break-even in trading
The break-even price is calculated using the following formula:
Break-even Formula
For long positions:
Break-even Price = Entry Price + (Total Costs per Share × Entry Price) + Commission
For short positions:
Break-even Price = Entry Price - (Total Costs per Share × Entry Price) - Commission
Step-by-Step Calculation
- Determine your entry price (the price at which you bought/sold the asset)
- Identify all costs associated with the trade (brokerage fees, taxes, etc.)
- Calculate the total costs per share by dividing total costs by the number of shares
- Add the commission to the total costs per share
- Apply the formula based on whether you're long or short
Using this method ensures you account for all expenses when determining when your trade becomes profitable.
Worked example
Let's calculate the break-even point for a long position:
| Parameter | Value |
|---|---|
| Entry Price | $50.00 |
| Number of Shares | 100 |
| Total Costs | $20.00 |
| Commission | $5.00 |
Calculation:
- Total costs per share = $20 / 100 shares = $0.20 per share
- Break-even price = $50 + ($0.20 × $50) + $5 = $50 + $10 + $5 = $65.00
This means you need the price to rise to $65.00 to cover all costs and make a profit.
FAQ
What is the difference between break-even and stop-loss?
Break-even is the price level where your trade becomes profitable, covering all costs. Stop-loss is the price level you set to limit potential losses if the trade moves against you. While related, they serve different purposes in risk management.
How do I use the break-even calculator?
Enter your entry price, number of shares, total costs, and commission. The calculator will show you the break-even price based on the formula provided. Use this information to set appropriate stop-loss and take-profit levels.
Is the break-even point the same for all trading strategies?
No, the break-even point can vary based on the strategy. Some strategies may have multiple entry points or different cost structures that affect the break-even calculation.