Risk reward ratio calculator
Enter a trade’s entry, stop and target to get its risk-to-reward ratio and the win rate that ratio needs to break even.
How it is calculated
The risk is the distance from entry to the stop, and the reward is the distance from entry to the target. Which way round depends on the direction of the trade:
The ratio compares the two, written risk first. A trade that risks 30 pips to make 90 is 1 : 3, which is the same as saying the reward is 3R, three times the risk.
The break-even win rate comes from asking when wins and losses cancel out. If every win pays the ratio and every loss costs one unit of risk, then at a win rate p the average trade is p × ratio − (1 − p) × 1. Setting that to zero and solving for p gives 1 ÷ (1 + ratio). At 1 : 3 that is 1 ÷ 4 = 25%: out of every four trades, one win at 3R pays for three losses of 1R.
Break-even win rate at common ratios
Computed with the same formula, before spread and commission.
| Risk to reward | Break-even win rate |
|---|---|
| 1 : 0.50 | 66.67% |
| 1 : 1.00 | 50.00% |
| 1 : 1.50 | 40.00% |
| 1 : 2.00 | 33.33% |
| 1 : 2.50 | 28.57% |
| 1 : 3.00 | 25.00% |
| 1 : 4.00 | 20.00% |
| 1 : 5.00 | 16.67% |
Two trades, worked through
A long trade on EURUSD
Buy at 1.0850 with a stop at 1.0820 and a target at 1.0940.
| Step | Working | Result |
|---|---|---|
| Risk | 1.0850 − 1.0820 | 0.0030 (30 pips) |
| Reward | 1.0940 − 1.0850 | 0.0090 (90 pips) |
| Ratio | 0.0090 ÷ 0.0030 | 1 : 3.00 |
| Break-even win rate | 1 ÷ (1 + 3) | 25.00% |
With 100 at risk, the loss at the stop is 100 and the profit at the target is 300.
A short trade on an index
Sell at 18,250 with a stop at 18,290 and a target at 18,170.
| Step | Working | Result |
|---|---|---|
| Risk | 18,290 − 18,250 | 40 points |
| Reward | 18,250 − 18,170 | 80 points |
| Ratio | 80 ÷ 40 | 1 : 2.00 |
| Break-even win rate | 1 ÷ (1 + 2) | 33.33% |
Pitfalls and assumptions
- A ratio alone says nothing about profit. A 1 : 3 trade idea that wins 20% of the time loses money on average; a 1 : 0.8 idea that wins 60% of the time makes money. The break-even win rate is the link between the two numbers.
- Spread and commission are not included. A long trade is bought at the ask, and closing costs come off the result, so the realised risk is a little larger and the realised reward a little smaller than the chart distances. The effect is largest on tight stops.
- Planned is not realised. Closing early, moving the stop or scaling out changes the ratio a trade actually achieved. A journal that records the result in R shows the realised figure.
- Notation varies. Some traders write reward first (3:1) and some write risk first (1:3). They describe the same trade. This page always writes risk first.
- Gaps and slippage. A stop is an order, not a guarantee of price. In a gap the loss can exceed the distance to the stop.
Frequently asked questions
How do you calculate the risk reward ratio?
Measure the distance from entry to the stop (the risk) and from entry to the target (the reward), then divide the reward by the risk. A long trade from 1.0850 with a stop at 1.0820 and a target at 1.0940 risks 0.0030 to make 0.0090, a ratio of 1 : 3.
What win rate do you need at a 1:2 risk reward ratio?
The break-even win rate at 1 : 2 is 1 ÷ (1 + 2) = 33.33%, before costs. At exactly that rate, one win of 2R pays for two losses of 1R. Below it the trades lose money on average at those distances, and above it they make money on average.
What is a good risk reward ratio?
No ratio is good or bad on its own. The ratio only means something together with the win rate achieved at that ratio. A 1 : 3 approach that wins 20% of its trades loses money, while a 1 : 0.8 approach that wins 60% of its trades makes money. Compare the win rate from your own records with the break-even win rate this calculator shows.
Is a 1:3 ratio the same as 3:1?
Usually, yes. They are the same trade written in a different order: 1 : 3 is risk to reward and 3:1 is reward to risk. Check which order a source uses before comparing numbers. This page always writes risk first.
Does the ratio include spread and commission?
No. It uses the price distances you enter. Costs make the realised risk slightly larger and the realised reward slightly smaller, which raises the win rate needed to break even. The break-even win rate calculator can include a cost per trade.
Related calculators
- Break-even win rate calculatorThe win rate at which average wins pay for average losses and trading costs.
- Trading expectancy calculatorThe average amount a set of trades makes or loses per trade, from win rate, average win and average loss.
- Position size calculatorLots, units, shares or contracts that keep the loss at your stop to a set amount. Forex, gold and silver, stocks, futures.
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