FX Breakeven Win Rate: Expected Value Calculation Including Cashback
Not sure what win rate you need for FX to break even?
In short, put your average win, average loss and cost into the expected value formula and find the win rate at which expected value is 0. Cashback works to lower cost.
This article gives the formula and worked examples. By the end, you can calculate the breakeven win rate for your own method.
In short: the breakeven win rate is where expected value is 0
- Expected value = win rate x average win - loss rate x average loss - cost + cashback
- Breakeven win rate = (average loss + cost - cashback) / (average win + average loss)
- The lower the cost, the lower the breakeven win rate
- Cashback does not guarantee profit, and results depend on the market
The FX expected value formula and how to find the breakeven win rate
Expected value shows how much a single trade gains or loses on average. If it is positive, funds tend to grow as you repeat trades.
Let the win rate be W, the average win and average loss in pips, and the cost and cashback per trade also in pips. Setting expected value to 0 gives the breakeven win rate formula.
| Item | Symbol | Meaning |
|---|---|---|
| Win rate | W | Share of trades that end in profit |
| Average win / average loss | G / L | Average pips of wins and of losses |
| Cost | c | Spread and commission, in pips per trade |
| Cashback | b | The return per trade converted to pips |
How much cashback moves the breakeven win rate
Take a method with an average win and average loss of 10 pips each and a cost of 1.5 pips. As you raise the return step by step from 0, the breakeven win rate falls.
| Return (per trade) | Calculation | Breakeven win rate | Difference from no return |
|---|---|---|---|
| 0 pips | (10 + 1.5 - 0) / 20 | 57.5% | - |
| 0.3 pips | (10 + 1.5 - 0.3) / 20 | 56.0% | 1.5 points lower |
| 0.5 pips | (10 + 1.5 - 0.5) / 20 | 55.0% | 2.5 points lower |
| 1.0 pips | (10 + 1.5 - 1.0) / 20 | 52.5% | 5.0 points lower |
On 1 lot of USDJPY, 0.3 pips equals ¥300. This level is an assumption for explanation and does not indicate actual return amounts.
What happens with a different risk-reward ratio
Here we fix the average loss at 10 pips and vary the average win. We assume a cost of 1.5 pips and a return of 0.5 pips.
| Average win | Breakeven win rate without return | Breakeven win rate with return |
|---|---|---|
| 5 pips | 76.7% | 73.3% |
| 10 pips | 57.5% | 55.0% |
| 15 pips | 46.0% | 44.0% |
| 20 pips | 38.3% | 36.7% |
Steps to apply the breakeven win rate to your own method
- 1
Gather your results
From your trade history, find the average win, average loss and win rate in pips. With few trades, results are prone to wide swings.
- 2
Enter the cost
Convert spread and commission to pips per trade. You can check the figures on each broker's page.
- 3
Enter the return
Once return amounts are confirmed, convert the amount per lot to pips. Before launch, put in a placeholder and run the numbers.
- 4
Compare with your actual win rate
See whether your win rate is comfortably above the breakeven win rate. If it is close, look for conditions with more margin.
Cautions to avoid overconfidence
- The calculation assumes the averages continue, and can break down as the market changes
- Spreads widen at certain times and around data releases, which increases cost
- Trading more often to chase returns raises cost and losses by the same ratio
- Even if the breakeven win rate falls, a method that tends to lose does not become a winning one
- We cannot be definitive about tax treatment, so consult a specialist as needed
Enter win rate, average win, average loss, cost and return to check expected value and the breakeven win rate.
Calculate expected value including cashbackFAQ
Q.How do I calculate the breakeven win rate in FX?
Use (average loss + cost - return) / (average win + average loss). If the average win and loss are the same, the breakeven win rate exceeds 50% by the amount of the cost.
Q.Does cashback lower the breakeven win rate?
The return effectively lowers cost, so it works to lower the breakeven win rate. However, return amounts are not yet confirmed, and how much it falls differs by method.
Q.If my win rate is above the breakeven win rate, will I definitely profit?
Not necessarily. The calculation is based on past averages, so results change as the market and spreads change. It does not guarantee profit.
This article is for information purposes only and is not investment advice. Conditions may change, so please check each broker's official page for the latest information. Offshore FX and CFD trading carries a risk of losses exceeding your principal.
