Free calculator
Risk / Reward Calculator
Enter your entry, stop and target. You get the reward-to-risk ratio, plus the number most traders skip: the win rate you'd need just to break even at that ratio.
Reward : risk
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Enter your numbers to calculate.
- Risk per share
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- Reward per share
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- Break-even win rate
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- Total risk
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- Total reward
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- Expectancy / trade
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What the ratio tells you
Reward-to-risk compares how far your target sits from your entry against how far your stop sits from it. A 3:1 setup means you stand to make three times what you stand to lose, if both levels are reached.
The ratio on its own is not a quality score. It becomes meaningful only when you pair it with a win rate, because the two together determine whether a strategy makes money.
Break-even win rates
For any reward:risk ratio there is a win rate below which you lose money. The formula is
1 ÷ (1 + ratio):
| Reward : risk | Break-even win rate | What that means |
|---|---|---|
| 0.5 : 1 | 66.7% | You must win two of every three trades |
| 1 : 1 | 50.0% | A coin flip, before costs |
| 1.5 : 1 | 40.0% | Comfortable for most discretionary traders |
| 2 : 1 | 33.3% | You can be wrong twice as often as right |
| 3 : 1 | 25.0% | Typical of trend-following systems |
| 5 : 1 | 16.7% | Wins are rare; drawdowns are long |
Note the trade-off hidden in the bottom rows. A 5:1 strategy is profitable at a 17% win rate, but it means losing four or five trades in a row routinely. Most people cannot execute that consistently, and abandon the system during a normal losing run.
Expectancy: the number that decides everything
Expectancy is the average amount you make per trade over a large sample, expressed in R:
Expectancy = (Win rate × Reward) − (Loss rate × Risk)
At a 2:1 ratio with a 40% win rate: (0.40 × 2) − (0.60 × 1) = +0.20R. Every trade is worth a fifth of your risk on average. Risking $250 a trade, that is $50 per trade, or $5,000 over a hundred trades, arriving unevenly and with drawdowns along the way.
Negative expectancy means no amount of discipline or position sizing saves you. All it changes is how long the decline takes.
Using it in practice
- Mark the stop from structure: below the pattern's low, beyond the level that invalidates your idea.
- Mark the target from structure: the first real resistance or support in the way.
- Calculate the ratio. Below your minimum, pass on the trade. There is always another.
- Size the position with the position size calculator so the R is the amount you intended.
Step three is where the money is made, and it is the step traders skip. Passing on mediocre setups is most of what separates a profitable year from a flat one.
Frequently asked questions
What is a good risk/reward ratio?
Most traders aim for at least 2:1, meaning the target sits twice as far away as the stop. A ratio on its own is only half the picture though, because it has to be read against your win rate. A 1.5:1 setup with a 60% win rate beats a 3:1 setup with a 25% win rate.
What win rate do I need to break even?
Divide 1 by (1 + your reward:risk ratio). At 1:1 you need 50%. At 2:1 you need 33.3%. At 3:1 you need 25%. This calculator shows the break-even win rate for whatever ratio you enter, which is the fastest way to sanity-check a setup.
Should I ever take a trade below 1:1?
Rarely, and only with a genuinely high win rate you've measured instead of assumed. A 0.5:1 setup has to win two out of every three trades just to break even before costs. Most traders taking sub-1:1 setups are the ones overestimating their win rate.
Does risk/reward guarantee profitability?
No. A high ratio only helps if you actually reach your targets. Set a target three times your stop distance because it makes the ratio look good, with heavy resistance sitting halfway there, and you've produced an attractive number and a losing strategy. The chart has to justify the target.
What is an R multiple?
R is your risk on a trade, the distance from entry to stop. Expressing results in R makes trades comparable whatever the position size, so a trade that made twice your risk is +2R whether that was $100 or $10,000. Most professional traders track performance in R and not in dollars.