Risk / Reward Ratio Calculator

The formula and what it hides

Reward-to-risk is the distance from entry to target divided by the distance from entry to stop. A trade with 30 points of upside and 10 of downside is 1:3. The ratio says nothing about how likely the target is, which is why it must always be read next to a win rate.

Break-even win rate makes that explicit: 100 ÷ (1 + ratio). At 1:1 you need better than 50% wins; at 1:3 only 25%. If your honest historical win rate for a setup sits below the break-even figure, the trade is negative expectancy no matter how attractive the chart.

• Reward / risk = |target − entry| ÷ |entry − stop|
• Break-even win rate = 100 ÷ (1 + reward/risk)
• Expectancy per trade = win% × reward − loss% × risk

Why raising the ratio is not free

Moving the target further away improves the ratio and lowers the win rate at the same time, because price has to travel further before you get paid. Tightening the stop improves the ratio too, but increases the chance of being knocked out by noise before the idea plays out.

The useful move is neither: find setups where structure puts the stop close to a level and the target at a genuinely reachable one. The ratio should be an outcome of good trade location, not a number you engineer.

R-multiples as a scorecard

Once every trade risks the same 1R, results become comparable. A month of +3R, −1R, −1R, +2R is +3R overall, and that is meaningful whether the account is $2,000 or $2,000,000. Logging outcomes in R rather than currency also removes the emotional pull of position size from your review process.

Expectancy: win rate and ratio must be read together

The ratio alone never decides profitability. Expectancy per trade is win% multiplied by reward minus loss% multiplied by risk. At 1:2, every loss costs 1R and every win returns 2R, so a 40% win rate nets +0.2R per trade before costs. At 1:0.8 the same win rate nets −0.28R. The better paper setup is not the one with the higher win rate.

The calculator's break-even win rate makes the requirement explicit: 100 ÷ (1 + ratio). Compare it with your honest historical win rate per setup, and only trade where you clear the bar after fees and slippage.

• Expectancy per trade = win% × reward − loss% × risk
• Break-even win rate = 100 ÷ (1 + reward/risk)
• Fees widen the effective stop and shrink the reward — recompute after costs

Entry quality decides whether a good ratio is real

A 1:4 ratio is worthless if the entry sits at the far end of a long run, the target is a level that rarely fills, or the stop is a hair away from normal noise. The ratio should be an outcome of good trade location, not a number you engineer by dragging the target further away.

Ask three questions before accepting any ratio: does the stop sit beyond a structure that invalidates the idea, is the target at a level with a real reason to reverse, and does the win rate of similar entries justify the profile.

Scaling, breakeven and the trailing exit

R-multiples are also the scorecard for exit management. Closing a third at +2R, moving the stop to breakeven, and letting the remainder run converts a fixed 1:2 plan into a dynamic one measured in average R per trade.

Whatever the exit style, log the outcome in R per decision. A system averaging +0.3R per trade with frequent trades compounds quickly; the same average with only a handful of opportunities needs the discipline kept small and consistent.