The 4 pip target with a 4 pip stop is not a coin flip
Posted: Sat Oct 31, 2026 8:30 am
A 4 pip target and a 4 pip stop looks like a 50 percent break-even. It is not. Say the spread averages 0.8 pip and commission works out to 0.4 pip per round turn. That is 1.2 pips of cost on every trade, winner or loser.
Net winner: 4 minus 1.2 = 2.8 pips. Net loser: 4 plus 1.2 = 5.2 pips. Break-even win rate = 5.2 / (2.8 + 5.2) = 65 percent. Not 50.
Stretch the target to 6 pips with the same 4 pip stop and the same cost: winner 4.8, loser 5.2, break-even 5.2 / 10 = 52 percent. Identical cost, far less drag, because a fixed bite hurts a small target more than a bigger one.
Then there is the part that gets missed: the cost is not constant. Spread at the open, around news or at rollover can easily double it. At 2 pips all-in the same 4 and 4 setup has a 2 pip winner and a 6 pip loser, so break-even jumps to 75 percent. That is why a system that tested fine can fall apart at the open.
Work out break-even from the average all-in cost on the actual statement, not the advertised spread. If that number sits above any win rate the strategy has ever shown, no entry filter will rescue it.
What break-even win rate does your current setup need once real costs are in, and how far is the live win rate from it?
Net winner: 4 minus 1.2 = 2.8 pips. Net loser: 4 plus 1.2 = 5.2 pips. Break-even win rate = 5.2 / (2.8 + 5.2) = 65 percent. Not 50.
Stretch the target to 6 pips with the same 4 pip stop and the same cost: winner 4.8, loser 5.2, break-even 5.2 / 10 = 52 percent. Identical cost, far less drag, because a fixed bite hurts a small target more than a bigger one.
Then there is the part that gets missed: the cost is not constant. Spread at the open, around news or at rollover can easily double it. At 2 pips all-in the same 4 and 4 setup has a 2 pip winner and a 6 pip loser, so break-even jumps to 75 percent. That is why a system that tested fine can fall apart at the open.
Work out break-even from the average all-in cost on the actual statement, not the advertised spread. If that number sits above any win rate the strategy has ever shown, no entry filter will rescue it.
What break-even win rate does your current setup need once real costs are in, and how far is the live win rate from it?