Risk/Reward Calculator
Evaluate any trade setup before you enter. See your risk-to-reward ratio and the minimum win rate needed to be profitable.
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Risk : Reward
1 : 2.50
Potential Loss
-$500.00
Potential Profit
+$1250.00
Risk per Unit
$5.00
Reward per Unit
$12.50
Break-even Win Rate
28.6%
What Is Risk/Reward Ratio?
The risk/reward ratio (R:R) compares how much you stand to lose versus how much you stand to gain on a trade. A ratio of 1:2 means you risk $1 to potentially make $2. A ratio of 1:3 means you risk $1 to potentially make $3.
Most professional traders aim for a minimum of 1:2. This means that even if you only win half your trades, you still come out ahead — because your winners are twice the size of your losers.
Break-even Win Rate
The break-even win rate tells you the minimum percentage of trades you need to win to avoid losing money at a given risk/reward ratio. At 1:1, you need to win more than 50%. At 1:2, you only need 33%. At 1:3, just 25%.
This is why experienced traders focus on the ratio, not just finding winners. A strategy that wins 40% of the time but maintains a 1:3 risk/reward is highly profitable. A strategy that wins 60% of the time with a 1:0.5 ratio loses money.
Start with the chart, then use the calculator
If you still need to decide where the stop loss and take profit belong, read the Stop Loss and Take Profit lesson. If you need to decide how large the trade should be before checking the ratio, read Position Sizing.