Risk/Reward Ratio Calculator
Calculate your risk-to-reward ratio from entry, stop-loss, and take-profit prices. See risk and reward amounts with a visual diagram.
Every trade has a risk and a reward. This calculator takes your planned entry price, stop-loss level, and take-profit target, and shows you the ratio between what you could gain and what you could lose. It auto-detects whether you are going long or short and displays a visual diagram of the trade setup. Risk-reward ratio, combined with win rate, is what determines whether a trading strategy makes money over time.
For informational purposes only. Not financial advice. Calculations are estimates and may not reflect your exact situation. Consult a qualified financial adviser for personalised guidance.
About Risk/Reward Ratio Calculator
How the Calculation Works
| Component | Formula (Long Trade) | Example (Entry: $100) |
|---|---|---|
| Risk (per share) | Entry - Stop-loss | $100 - $95 = $5 |
| Reward (per share) | Take-profit - Entry | $115 - $100 = $15 |
| Risk:Reward ratio | Risk : Reward | 1:3 |
| Break-even % | (Risk / Entry) x 100 | 5% |
For short trades, the formulas are reversed: Risk = Stop-loss - Entry, Reward = Entry - Take-profit. The calculator detects your direction automatically from where the stop-loss sits relative to the entry price. Place the stop below entry and it reads as a long; place it above and it reads as a short.
Worked example: You buy a stock at $100, set a stop-loss at $95, and target $115. Risk per share is $5, reward is $15, so your R:R is 1:3. If you take 200 shares, your dollar risk is $1,000 and your potential reward is $3,000. The break-even move is 5% (risk divided by entry), meaning the price only needs to drop 5% to trigger your stop.
What Does the Ratio Mean?
| R:R Ratio | Meaning | Required Win Rate to Break Even |
|---|---|---|
| 1:1 | Risk equals reward | 50%+ (must win more than half) |
| 1:2 | Reward is 2x the risk | 33%+ (win one third of trades) |
| 1:3 | Reward is 3x the risk | 25%+ (win one quarter of trades) |
| 1:5 | Reward is 5x the risk | 17%+ (win one sixth of trades) |
| 2:1 | Risk is 2x the reward | 67%+ (must win two thirds) |
The required win rate formula is: Win Rate = 1 / (1 + R:R ratio). A 1:2 ratio needs 1/(1+2) = 33% wins to break even. This is the minimum accuracy needed just to recover costs before commissions, spreads, and slippage. Aim for a win rate a few points above the break-even figure so profit actually compounds.
Expectancy: Why R:R and Win Rate Must Be Combined
Risk-reward on its own tells you nothing about profitability. A 1:10 ratio sounds great until you learn the strategy only wins 5% of the time. The metric that matters is expectancy, the average dollar outcome per trade.
The formula is: Expectancy = (Win Rate x Average Win) - (Loss Rate x Average Loss). A strategy with a 40% win rate and 1:2.5 R:R produces (0.40 x 2.5) - (0.60 x 1) = +0.40R per trade. Over 100 trades risking $100 each, that is about $4,000 profit before costs.
| Win Rate | R:R | Expectancy per Trade | Profitable? |
|---|---|---|---|
| 60% | 1:1 | +0.20R | Yes |
| 50% | 1:1.5 | +0.25R | Yes |
| 40% | 1:2 | +0.20R | Yes |
| 30% | 1:3 | +0.20R | Yes |
| 55% | 1:1 | +0.10R | Barely (costs may kill it) |
| 40% | 1:1 | -0.20R | No, loses money |
The 1R notation means "one unit of risk" - if you risk $100 per trade, +0.20R equals $20 per trade on average. A positive expectancy strategy makes money over a large sample; a negative one loses money no matter how the individual trades look in the short run.
How to Use R:R in Your Trading Plan
| Win Rate | Minimum R:R Needed | Strategy Type |
|---|---|---|
| 70% | 1:0.43 (can risk more than reward) | High win rate scalping, mean reversion |
| 50% | 1:1 (break even) | Range trading, moderate setups |
| 40% | 1:1.5 | Trend following, swing trading |
| 30% | 1:2.33 | Breakout trading, momentum |
| 20% | 1:4 | Long-shot plays, rare but large wins |
Professional traders care more about the combination of win rate and R:R than either metric alone. A strategy that wins only 30% of the time is profitable if the average winner is 3x the average loser. According to Above The Green Line research cited in 2025 trading guides, professional scalpers report 55-65% win rates with tighter 1:1 to 1:1.5 ratios, while swing traders typically run 40-50% win rates with 1:2 to 1:3 ratios.
Reading the Visual Diagram
The coloured bar shows your stop-loss in red and take-profit in green, with your entry in blue between them. The relative widths give you an intuitive sense of the trade's risk profile - a wider green zone relative to red means a more favourable setup. If the red zone is wider than the green, you are taking a trade where losing is cheaper than winning is rewarding, which is rarely a good idea unless your win rate is very high.
The diagram is to scale with the actual price distances between your levels, so a stop-loss that is closer to entry than the take-profit shows up as a visibly narrower red segment. This is useful for spotting "bad" R:R setups at a glance before you place the order - if the red and green bands look roughly equal, your ratio is near 1:1 and the trade will only pay off if your setup edge is strong.
R:R Ratios Across Different Markets
| Market | Typical R:R Range | Why |
|---|---|---|
| Forex major pairs | 1:1.5 to 1:3 | Tight spreads, liquid intraday ranges, trending behaviour during session overlaps |
| US equities (swing trading) | 1:2 to 1:4 | Larger multi-day moves, stops at structural support/resistance |
| Crypto majors (BTC, ETH) | 1:2 to 1:5 | High volatility creates both wide stops and outsized reward potential |
| Futures scalping | 1:1 to 1:1.5 | Fast exits, high win rate, tight stops near order-flow levels |
| Options (defined risk) | Varies widely | Credit spreads often run 1:0.3; long calls/puts can target 1:5+ |
Forex and crypto traders often use a fixed pip/point-based stop rather than a percentage, which means the R:R naturally scales with volatility. Equity traders more often place stops at technical levels (prior swing low, moving average, volume node) and size the position to match a fixed dollar risk. Both approaches are valid - what matters is consistency across trades so the expectancy maths stays reliable.
Position Sizing with R:R
Once you know your risk per share, you can calculate position size based on how much of your account you are willing to risk:
| Account Size | Max Risk (2%) | Risk per Share | Position Size |
|---|---|---|---|
| $10,000 | $200 | $5 | 40 shares |
| $25,000 | $500 | $5 | 100 shares |
| $50,000 | $1,000 | $10 | 100 shares |
| $100,000 | $2,000 | $2 | 1,000 shares |
The formula is: Position Size = Account Risk Amount / Risk per Share. Most experienced traders risk no more than 1-2% of their account on any single trade. The Van Tharp "1% rule" is widely taught in US prop firms for this reason: at 1% risk per trade, it takes roughly 70 consecutive losses to drop account equity by half, giving traders time to notice their strategy is broken before it blows up.
If you want to compound gains after the trade closes, pair this calculator with the ROI Calculator to model returns over a full trading year, and use the Break-Even Calculator if you want to know exactly where costs and entry meet.
What Do Real Trading Statistics Say?
The uncomfortable truth is that most retail day traders lose money over time. A landmark 2020 study by Chague, De-Losso, and Giovannetti at FGV School of Economics tracked every individual who began day trading Brazilian equity futures between 2013 and 2015 and persisted for at least 300 days. They found 97% of persistent day traders lost money, only 0.4% earned more than a bank teller (about US$54 per day), and the single top performer made US$310 per day with huge volatility (standard deviation of US$2,560).
The older Barber and Odean (2000) paper covering US individual investors found that the most active traders (top 20% by turnover) underperformed the market by about 6.5 percentage points per year, largely due to trading costs and behavioural mistakes. Other 2025 reports suggest only 1% of day traders remain consistently profitable after five years, and even among funded proprietary traders, only around 16% are profitable in any given period.
None of this means trading is impossible. It means that without a tested edge, disciplined R:R, and strict position sizing, the maths works against you. The calculator on this page is the first line of defence: if you cannot find a setup with acceptable R:R, the correct action is to skip the trade entirely.
Common Mistakes
| Mistake | Why It Hurts |
|---|---|
| Moving your stop-loss further away after entering | Increases your risk beyond what you planned; defeats the purpose of risk management |
| Taking profit too early | Reduces your average reward, making a good R:R ratio meaningless in practice |
| Ignoring R:R entirely | Without it, you are guessing whether your strategy is profitable over time |
| Risking too much per trade | A few consecutive losses can devastate your account (keep risk under 2%) |
| Forcing a 1:3 ratio on every setup | Demanding 1:5 R:R means you will rarely enter trades; many profitable setups are 1:1.5 to 1:2 |
| Setting stops at round numbers | Market makers target obvious round-number stops; place them at technical levels instead |
| Ignoring fees and slippage | Fees eat into every R; a 1:1 strategy can flip to negative expectancy once costs are included |
For calculating actual profit after fees on a specific trade, use the Stock Profit Calculator or Crypto Profit Calculator. For options with defined risk, the Options Profit Calculator shows max profit and loss at different price levels. All calculations run in your browser - nothing is sent to a server.
Sources
Frequently Asked Questions
What is a risk-reward ratio?
The risk-reward ratio compares how much you stand to lose versus how much you could gain on a trade. If your risk is $5 and your potential reward is $15, your R:R ratio is 1:3. Higher ratios mean more potential reward relative to risk, which is generally preferred.
What is a good risk-reward ratio?
Many traders aim for at least 1:2 or 1:3. A 1:2 ratio means you could lose two trades for every winning trade and still break even. Even with a 40% win rate, a 1:3 ratio can be profitable. The right ratio depends on your trading strategy and win rate.
How does the calculator detect long vs short positions?
It automatically determines the position type based on where you place your stop-loss relative to entry. If the stop-loss is below entry, it is treated as a long position. If the stop-loss is above entry, it is a short position.
What is break-even percentage?
The break-even percentage shows how far the price needs to move from your entry to cover the distance to your stop-loss. It helps you understand how much room you are giving the trade before getting stopped out.
Should I always use a stop-loss?
Most experienced traders use stop-losses to manage risk. Without one, a single bad trade can wipe out many winning trades. The calculator helps you plan exact levels before entering a trade so you are not making emotional decisions in the moment.
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