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Risk/Reward Calculator

Calculate the reward-to-risk ratio of a trade from its entry, stop-loss and target, plus the win rate it needs to break even.

This risk/reward calculator compares what a trade stands to gain against what it stands to lose. Both sides are price distances measured from the entry: the distance to the stop-loss is the risk, the distance to the target is the reward, and the risk-to-reward ratio is one divided by the other.

Formula: ratio = |target − entry| ÷ |entry − stop|

Your figures

Results

Risk / reward ratio

2.50 : 1

reward per 1 unit of risk

Risk per unit
2.0000
Potential reward per unit
5.0000
Break-even win rateShare of trades at this ratio that must win to break even, before costs.
28.57%
Stop distance from entry
2.00%
Target distance from entry
5.00%

What this means

A 2.50:1 reward-to-risk ratio means the potential profit is 2.50 times the amount at risk. At this ratio, 28.57% of trades would need to reach the target simply to break even. This calculation does not indicate the probability that the trade will succeed.

  • Spread and commission are excluded; both raise the win rate needed to break even.

Risk / reward ratio: 2.50 : 1

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About the Risk/Reward calculation

The ratio alone says nothing about whether a trade is likely to work. What it does establish is a threshold — the proportion of trades at that ratio that would need to reach their target for the wins and losses to cancel out. That figure is calculated here alongside the ratio.

A high ratio and a low win rate can produce the same result as a low ratio and a high win rate. The two numbers only mean something together, which is why this reward/risk ratio calculator returns both.

Risk/Reward formula

risk   = |entry − stop|
reward = |target − entry|
risk/reward ratio = reward ÷ risk
break-even win rate = risk ÷ (risk + reward)
| |
Absolute value — the distance, ignoring direction.
break-even win rate
The proportion of trades that must reach the target for total wins to equal total losses.

The ratio is a simple division of two distances, which is why it works identically for shares, futures, currencies or crypto — the units cancel out.

The break-even win rate falls directly out of the same two numbers. If wins pay R times what losses cost, then p wins and (1 − p) losses break even when p × reward = (1 − p) × risk, which rearranges to p = risk ÷ (risk + reward).

This is why the two figures are inseparable. A 3:1 ratio needs 25% of trades to win; a 1:2 ratio needs 66.7%. Neither is better in the abstract — they describe different trade-offs.

Risk/Reward: a worked example

A long trade entered at 100, with a stop at 98 and a target at 105.

  1. Risk|100 − 98| = 2.00
  2. Reward|105 − 100| = 5.00
  3. Ratio5.00 ÷ 2.00 = 2.50 : 1
  4. Break-even win rate2 ÷ (2 + 5) = 28.57%

A 2.5:1 reward-to-risk ratio means the potential profit is 2.5 times the amount at risk. At this ratio, 28.57% of trades would need to reach the target simply to break even. This calculation does not indicate the probability that the trade will succeed.

How to use the Risk/Reward calculator

  1. Choose long or short. The calculator checks that the stop and target sit on the correct sides of the entry and flags the combination if they do not.
  2. Enter the entry price you intend to use.
  3. Enter the stop-loss price — below entry for a long, above it for a short.
  4. Enter the target price — above entry for a long, below it for a short.
  5. Read the reward-to-risk ratio and, just as importantly, the break-even win rate underneath it.

Limitations of the Risk/Reward calculator

Every calculation makes assumptions. These are the ones that matter here.

  • Excludes spread and commission. Both raise the win rate required to break even, sometimes materially on short-term trades.
  • Assumes both the stop and the target fill at their exact prices, which gaps and slippage can prevent.
  • Says nothing about probability. A 10:1 ratio is easy to construct with a distant target that is rarely reached.
  • Does not account for partial exits, trailing stops or positions scaled in over several entries.

Frequently asked questions about Risk/Reward

What counts as a good risk/reward ratio?

There is no ratio that is good in isolation, and this calculator does not suggest one. A 1:1 ratio needs a win rate above 50%; a 3:1 ratio needs above 25%. Which combination suits a given approach depends on the win rate it actually achieves, which is what the expectancy calculator measures.

Why does the calculator reject my stop price?

For a long trade the stop must be below entry and the target above it; for a short, the reverse. Otherwise the numbers would describe a trade that cannot be placed as specified.

Should costs be included in the risk-to-reward ratio?

This calculator works on raw price distances. To include costs, use the break-even win rate calculator, which takes a per-trade cost figure and shows how much it raises the required win rate.

Is a 2:1 ratio twice as likely to be profitable as 1:1?

No. The ratio describes the size of the outcomes, not their likelihood. Wider targets are generally reached less often, which is exactly why the break-even win rate matters more than the ratio alone.

Last reviewed . See our methodology and editorial policy.

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