{"term":{"slug":"break-even-point","term":"Break-Even Point","definition":"The account balance or number of trades at which cumulative profits equal cumulative losses plus costs (challenge fees, commissions). In prop trading, this is the minimum performance needed to recover your initial investment.","extendedExplanation":"Break-even in prop firm trading has two meanings. First, the trade-level break-even: moving your stop-loss to your entry price after the trade moves in your favor, eliminating risk on that trade. Second, the account-level break-even: earning enough in payouts to cover challenge fees and other costs.\n\nFor account-level break-even, consider: you paid $540 for an FTMO challenge. Your profit split starts at 80%. To recover the $540 fee, you need $540/0.80 = $675 in trading profit on your funded account. However, FTMO refunds the fee with your first payout, so actual break-even is your first profitable payout.\n\nTrade-level break-even is a risk management technique. After a trade moves in your favor by a certain amount (often 1R -- the distance from entry to stop), you move the stop to entry. This turns the trade into a \"free trade\" where you cannot lose. This is particularly valuable in prop trading where preserving drawdown room is critical.","exampleWithNumbers":"Total prop firm costs: FTMO $100K challenge at EUR 540 ($590). You pass after 2 months. First funded payout: $4,000 profit * 80% = $3,200 to you + $590 fee refund = $3,790 total. Break-even achieved on first payout. If you failed and retried once: total cost = $1,180. Now you need $1,180/0.80 = $1,475 in funded profit (before refund) to break even.","category":"risk","relatedTerms":["risk-reward-ratio","challenge-fee","payout-split","stop-loss","win-rate"]},"_links":{"self":"https://runvigil.app/api/glossary/break-even-point","page":"https://runvigil.app/learn/break-even-point","allTerms":"https://runvigil.app/api/glossary","learn":"https://runvigil.app/learn"}}