Risk / Reward Ratio Calculator
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Enter your entry price, stop-loss and target to see the reward-to-risk ratio of the trade along with the break-even win rate you would need to come out ahead. Everything is calculated on your device.
What the risk-reward ratio tells you
The reward-to-risk ratio compares how much you stand to gain on a trade against how much you stand to lose. It is one of the most important numbers in a trading plan because it, together with your win rate, determines whether a strategy is profitable over time. A ratio of two to one means your target is twice as far from entry as your stop, so a win pays double what a loss costs.
This calculator derives the ratio directly from three prices you already plan around: where you get in, where you cut the loss, and where you take profit.
The formulas
Reward is the absolute distance from entry to target, and risk is the absolute distance from entry to stop-loss. The ratio is simply reward divided by risk. Using absolute distances means the tool works identically for long trades, where the target sits above entry, and short trades, where it sits below.
The break-even win rate is risk divided by the sum of risk and reward, expressed as a percentage. It answers a crucial question: at this ratio, how often do I need to be right just to avoid losing money?
- Reward = absolute value of target minus entry
- Risk = absolute value of entry minus stop-loss
- Ratio = reward / risk
- Break-even win rate = risk / (risk + reward) x 100%
Why the break-even win rate matters
A high ratio lowers the win rate you need. At three to one, the break-even win rate is just twenty-five percent, so you can be wrong three times out of four and still break even. At one to one you need to win more than half your trades. Seeing this number keeps expectations honest: a tempting one-to-one setup demands a strong edge, while a wide-target three-to-one trade can be profitable even if it misses more often than it hits.
Pairing the ratio with your realistic win rate is how you judge whether a setup is worth taking at all.
Using it wisely
Set your stop and target based on the chart, the trade's structure and the instrument's volatility, not simply to hit a pretty ratio. A stop placed too tight just to improve the number will get triggered by normal noise, turning a good ratio into a low win rate. The ratio is a filter, not a goal in itself.
Also remember the ratio ignores costs. Commissions, spread and slippage eat into the reward and widen the effective risk, so the real break-even win rate is a little higher than the raw figure. Use the result to compare setups and to keep your winners meaningfully larger than your losers.
Frequently asked questions
What is a good risk-reward ratio?
Many traders look for at least two to one, meaning the potential reward is twice the risk, but the right level depends on your win rate. A lower ratio can still work if you win often; a higher ratio tolerates more losing trades.
Does it work for short positions?
Yes. The tool uses absolute distances, so it handles shorts, where the target is below entry and the stop is above it, exactly like longs.
Why is my break-even win rate so high?
A high break-even win rate means your reward is small relative to your risk. Widening the target or tightening the stop sensibly improves the ratio and lowers the win rate you need.
Does the ratio include fees?
No. It is based purely on the three prices. Commissions, spread and slippage reduce the real reward and raise the true break-even win rate slightly.
Can the ratio be less than one?
Yes, when your target is closer than your stop. That means you risk more than you aim to make, which requires a very high win rate to be profitable.
Should I ever take a trade below two to one?
Sometimes. If your strategy wins a large share of the time, even a one-to-one or lower ratio can be profitable. The break-even win rate shown tells you exactly what edge you need.
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