Risk-Reward Calculator

How risk-reward ratios work

This free risk-reward calculator works out the ratio, the break-even win rate and the position size hint for any trade. It is for forex, crypto and stock traders who want to know whether a trade is worth taking before they open it. It runs entirely in your browser, needs no sign-up, and stores nothing. Enter your entry, stop loss and take profit prices, and it returns the ratio in seconds.

What is a risk-reward ratio?

A risk-reward ratio compares what you stand to lose with what you stand to gain on a trade. Risk is the distance from your entry price to your stop loss. Reward is the distance from your entry price to your take profit target. A ratio of 1 to 2 means you risk one unit to make two units.

The ratio is written as 1 to R, where R is the reward multiple. A 1 to 2 trade risks $100 to make $200. A 1 to 0.5 trade risks $100 to make only $50. Most traders look for ratios of at least 1 to 1.5, because a ratio below 1 to 1 needs a very high win rate just to break even.

How do you calculate risk-reward ratio?

Subtract the stop loss from the entry price to get the risk. Subtract the entry price from the target price to get the reward. Then divide the reward by the risk. If risk is 5 points and reward is 10 points, the ratio is 1 to 2. This calculator does the same steps for any entry, stop and target.

Worked example: entry 100, stop 95 and target 110. Risk is 100 minus 95, which is 5 points. Reward is 110 minus 100, which is 10 points. Dividing 10 by 5 gives a reward multiple of 2, so the ratio is 1 to 2. The same steps work for a short trade, where the stop sits above the entry and the target sits below it.

What win rate do you need to break even?

The win rate you need depends only on your ratio. Divide one by one plus the reward multiple. A 1 to 2 trade needs a win rate of 33.33 percent, so you can lose two trades in three and still break even before costs. A 1 to 1 trade needs 50 percent, which is a much harder target to hold.

Trading costs push the real break-even rate higher. Spreads, commissions and overnight fees take a slice from every trade, so a strategy that breaks even on paper can lose money in real trading. Always add your typical costs to the calculation before you judge a strategy.

Is a higher risk-reward ratio always better?

No, a higher ratio is not always better. Aiming for a very distant target can lower your win rate because price reaches far targets less often. A 1 to 5 target sounds attractive, but if it wins only 10 percent of the time, the strategy loses money. The best ratio is one your own trading history can support.

Expectancy is what matters, not the ratio alone. Expectancy combines win rate and average win and loss size into one figure. A 1 to 1.5 strategy that wins 50 percent of the time beats a 1 to 5 strategy that wins only 10 percent, even though the second ratio looks far better on its own.

Most retail traders lose money on leveraged products. A 2023 report by the European Securities and Markets Authority noted that between 74 and 89 percent of retail clients lose money when trading contracts for difference. That is why a realistic ratio and a tested win rate matter more than chasing a large target.

How does risk-reward link to position size?

Risk-reward sets the ratio, while position size sets the dollars at stake. Decide the dollars you will risk first, then divide that amount by the risk per unit to find how many units to trade. A trade with a 1 to 2 ratio and $100 of risk can target $200 of profit, whatever the unit count is.

Example: with $100 of risk and 5 points of risk per unit, you can trade 20 units. If the trade reaches its target, the profit is 20 units times 10 points, which is $200. The ratio stays 1 to 2 at any unit count, because both risk and reward scale together.