Risk reward ratio calculator
Before you take a trade, you should know what it can win, what it can lose and how often it has to work to be worth it. Enter your entry, stop, target and position size, plus fees and your usual win rate, and this calculator gives the reward to risk ratio, the win rate the trade needs to break even and what it is worth on average each time you take it. The table compares the same trade with nearer and further targets.
What you risk and what you stand to gain
The money at stake on each side of this trade, after fees.
Other targets for the same entry and stop
Moving the target changes both the ratio and the win rate needed. Expected profit uses your win rate for every row, which flatters the far targets because they are hit less often in practice.
| Target | Price | Reward | Break-even win rate | Expected at your win rate |
|---|
How the ratio and expectancy are worked out
Risk and reward are measured from your entry. Fees make every trade a little worse, so they come off the reward and are added to the risk.
Risk
Distance to the stop, times position size, plus fees.
risk = |entry − stop| × size + fees
Reward
Distance to the target, times position size, minus fees.
reward = |target − entry| × size − fees
Ratio
How many units of risk the reward is worth.
reward to risk = reward ÷ risk
Break-even win rate
The win rate at which wins and losses cancel out.
break-even = risk ÷ (risk + reward)
Expectancy
The average result per trade at your win rate.
expected = win rate × reward − (1 − win rate) × risk
Risk reward questions
How do you calculate the risk reward ratio?
Divide the distance from entry to target by the distance from entry to stop. Buying at $100 with a stop at $96 and a target at $110 risks $4 to make $10, a reward to risk of 2.5, often written 1:2.5. Fees reduce the reward and add to the risk, so include them for small moves.
What is a good risk reward ratio?
It depends on how often you win. A ratio of 1:2 needs you to win more than a third of trades to profit, while 1:1 needs more than half. Scalpers often accept low ratios with high win rates, and trend traders accept low win rates for big ratios.
What win rate do I need to break even?
Break-even win rate equals risk divided by risk plus reward. At 1:2 that is 1 divided by 3, about 33 percent. The calculator shows this for your trade and for a range of other targets.
Is a higher risk reward ratio always better?
No. A far-away target is reached less often, so a 1:5 trade can be worse than a 1:2 trade if it rarely gets there. What matters is expectancy: how often you win multiplied by what you win, minus how often you lose multiplied by what you lose.
How is this different from R multiples?
They are the same idea. One R is the amount you risk, so a trade that makes twice its risk is a 2R winner. Thinking in R lets you compare trades of different sizes on the same scale.
Should I count fees?
Yes, on short-term trades. A $10 round-trip fee hardly matters on a $1,000 target but can turn a small scalp into a loser. The calculator subtracts fees from the reward and adds them to the risk.