What does ‘Points to breakeven’ mean in brokerage calculator? How it is useful please?
Points to breakeven (breakeven point or BEP) in share trading is the price at which the net gains or net losses are almost 0 after paying the brokerage and taxes for both the buy and sell transactions and adding other expenses.
So, by above example if your net gain will be 0.11 paise(on selling price) then you will be in breakeven i.e., neither profit (cost of brokerage recovered) neither loss. So if you wanted actual profits by covering brokerages and taxes you have to earn more than 0.11 paise per quantity of stock.
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Points to Breakeven is an indicator that will let you know after what price the actual profit starts. For Ex- say you found a business opportunity between 2 cities. Say demand for Rice bags is high in City 1 and supply of rice bags is high in City 2. Say a 100bags of rice costs you 1lac at city 2 and the same rice bag costs 1.5lac in City 1.
So with the above info does it mean you will make straight 50k profits? No right, Because you need to add expenses such as transport, rent, salary, taxes and etc. So let’s consider transport cost is 5k, rent for a place to store rice bags is 3k, Salary, and other expenses is 10k. So now the total expenses are 5k+3k+10k= 18k.
So now you will start making profits only if you sell 100 rice bags above 1.18lac. Hence 18k is your breakeven. So before selling you will make sure to sell above 1180. If you sell at 1500. You will make a handsome profit of 1500-1180= 320rs per rice bag.
Similarly, when you buy and sell stocks there are fixed expenses that you cannot ignore like STT, GST, Stamp duty, brokerage charges, Exchange charges, clearing charges, etc. These costs get levied irrespective of you make profits or loss. Points to breakeven will help you to execute your buy-sell orders knowing the PnL.
In the above screenshot point to breakeven is 0.11 which means your real profit starts once the price crosses 100.11. So before you sell you will know the price at which you can sell to stay profitable.
Hope it helped.
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Very well explained. Than you for your time and help here !
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Is “Points to breakeven” and “Pips to breakeven” both is same or different?
While trading currency/forex traders usually refer price movements in pips(percentage in point) as the minimum ticks happens after 3rd decimal value, for ex- 0.0025, 0.0050, 0.0075 etc.
So 0.01points is equal to 4 pips.
While trading stocks since its traded at 2 decimal values, its referred to points.
On currency brokerage calculator for ease of reference both the calculations are mentioned.
For more info on PIP’s check this.
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