One of the most important numbers for a CFDs trader is the percentual success rate of trades. There is a specified minimum rate which you must exceed to be profitable in the long term. This rate is called breakeven ratio and usually lies between 55% and 60%. Read more about how to calculate it and how the trader's long term profit depends on it.
What does breakeven ratio (minimal success rate) means for me?
If your success rate is...
- lower than breakeven ratio, you are losing money in the long term.
- equal to breakeven ratio, you are not making any moneynule.
- higher than breakeven ratio, you are making money in the long term.
- Watch the market and read economic news
- Avoid unnecessary emotions
- Choose your trades carefully
- Gather experience whenever you can
At the end of the article we will demonstrate trading by five different traders and show that only traders with success rate above breakeven ratio can be profitable in the long term.
How to calculate my breakeven ratio?
Minimal percentual success rate you are looking for depends on the profit (payout) of the CFDs which you are trading. We note payout as "P" and the final breakeven ratio as "B", then we can use this equation:
B = 1 / (1 + P)
Regular options, traded with a good broker such as Topoption, usually have payout is around 80 %.
B = 1 / (1 + 0,80) = 1 / 1,80 = 55,56%
Worse brokers such as Instaforex have lower payout, usually around 75 % and so the breakeven ratio is higher. In other words, it is more difficult to make money.
B = 1 / (1 + 0,75) = 1 / 1,75 = 57,14%
How to increase your trade profitability?
Hopefully this article will help you to become more successful with trading CFDs.
My method cannot be used everywhere. Most banks and traders do not know what this method is about. And even when they do know about it, they would never, under any conditions, provide it to ordinary people. That's why it's very important to choose a reliable licensed broker who will allow you to make money. These are my two favourite brokers. Register with one of them - or even both of them. They both offer advice, video tutorials and a personal adviser - absolutely free.
Try out the strategy with a demoversion:
Minimum deposit: $10