# Binary Options: Calculating Breakeven Win-Rate for a Given Payout

How often does my trades need to be successful in order to be consistently profitable in the long run when trading binary options? This is a very common question and the answer is shown in the formula above.

As you can see, the answer depends very much on the payout percentage for the given trading asset.

## What is Win-Rate?

Often expressed as a percentage, the win-rate is the number of times on average that your trades are successful, out of a total of 100 trades. So, if you make a total of 1000 trades and are correct in 597 of those trades, then your win-rate is 59.7%.

In reality, for the win-rate number to be statistically significant, way more than 100 trades are needed, usually in the thousands. The larger the sample size, the more accurate the win-rate figure.

## Breakeven Win-Rates for Common Payout Percentages

The table below lists breakeven win-rates for typical payout percentages offered by binary option brokers.

Payout (%) Win-Rate (%)
95 51.3
90 52.6
85 54.1
80 55.6
75 57.1
70 58.8
65 60.6
60 62.5

So, for example, if the payout is 70%, the trader will need to win on average 58.82 trades out of every 100 trades entered in order to achieve breakeven.

## Calculating Expected Returns

Supposed a binary option trader have developed a trading system for trading USD/GBP that achieves a win-rate of 55%. While searching for a binary option broker, he found a Broker A that offers 80% payout and another Broker B who offers 85%.

Let's see the expected return for each of these brokers.

We assume each trade having a deal size of \$100, and the trader makes a total of 1000 trades using this system. Based on a win-rate of 55%, the trader will make 550 profitable trades and 450 losing trades.

### With Broker A, the expected return is:

Total Gains from Profitable Trades = 550 x \$100 x 80% = \$44,000

Total Loss from Losing Trades = 450 x \$100 = \$45,000

Total Profit/Loss = \$44,000 - \$45,000 = -\$1000

### With Broker B, the expected return is:

Total Gains from Profitable Trades = 550 x \$100 x 85% = \$46,750

Total Loss from Losing Trades = 450 x \$100 = \$45,000

Total Profit/Loss = \$\$46,750 - \$45,000 = +\$1,750

Broker A Broker B
Payout 80% 85%
No. of Profitable Trades 550 550
No. of Losing Trades 450 450
Deal Size \$100 \$100
Net Gains from Profitable Trades \$44,000 \$46,750
Net Loss from Losing Trades \$45,000 \$45,000
Net Profit/Loss -\$1,000 +\$1,750

As you can see, even though it seems that the difference in breakeven win-rates is only a few percentage points, they actually matter a great deal in the long run.

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