The risk reward ratio compares what a trade can lose with what it aims to gain. Type in your entry, stop loss and target below and the calculator shows the ratio as an R multiple, the distance to the stop and to the target in price and in percent, and the share of trades you would need to win to break even at that ratio. It is free, needs no account and runs in your browser.
- Win rate to break even
- 25 %
Break-even win rate is 1 divided by (1 + the ratio). Spread, commission and slippage are not included; they make the real break-even point higher.
An educational estimate, not advice. Prices can gap through a stop, so a real loss can be larger. Trading carries a high risk of loss.
How the ratio is worked out
The risk is the distance between your entry and your stop. The reward is the distance between your entry and your target. Divide the reward by the risk and you have the ratio. A stop 2 points away and a target 6 points away gives 6 divided by 2, which is 3, written 1 : 3 or 3R: the target is three times as far as the stop. The numbers in this example are made up for illustration only.
The calculator reads the direction from your levels. A stop below the entry means a long trade, so the target must be above it. A stop above the entry means a short trade, so the target must be below it. If the levels contradict each other it tells you instead of showing a ratio.
The break-even win rate
A ratio alone says nothing about whether a method works, because it ignores how often the trade wins. The link between the two is simple: if every winner earns R times what every loser costs, you break even when your win rate is 1 divided by (1 + R). At 1 : 1 that is 50 percent, at 1 : 2 about 33 percent and at 1 : 3 25 percent.
That is a break-even point, not a target and not a forecast. Spread, commission and slippage make the real figure higher, so a tight stop on a small move needs extra care. Your journal will tell you what your actual win rate is; the calculator only tells you what a ratio asks of it.
Adding your account size
If you also enter an account size and the percentage you are willing to risk, the calculator shows the risk and the reward in money, the reward as a share of the account, and the number of units that would lose exactly your chosen amount at the stop. For lots in forex, gold, indices or crypto with pip values, leverage and costs, use the position size calculator, which handles those contract details.
A bigger ratio is not automatically better
A distant target is hit less often than a near one, so stretching the target to improve the ratio can lower the win rate by more than it helps. Choose the stop where the idea is clearly wrong and the target where the market has a reason to pause, then read the ratio as information about the trade. If the ratio is poor, skipping the trade is a valid decision.
Results are educational estimates, not advice. Prices can gap through a stop, and trading carries a high risk of loss.
Frequently asked questions
What is a good risk reward ratio?
There is no figure that suits everyone, because the ratio only means something together with your win rate. A lower ratio can work with a high win rate and a higher ratio with a low one. Use the break-even win rate shown above as a reference for your own method, and check it against your journal.
How do I calculate the risk reward ratio?
Divide the distance from your entry to your target by the distance from your entry to your stop. If the target is 6 points away and the stop is 2 points away, the ratio is 3, or 1 : 3.
What win rate do I need to break even?
It is 1 divided by (1 + the ratio). At 1 : 1 you need 50 percent, at 1 : 2 about 33 percent and at 1 : 3 25 percent, before spread, commission and slippage. Those costs raise the real figure.
Does a high risk reward ratio guarantee profit?
No. It describes the plan for one trade, not the outcome. If the target is rarely reached, a high ratio can still lose money over many trades. Trading carries a high risk of loss.
Check the ratio before you place the trade
Register free to open the calculators and the journal in the member area.
Educational content, not financial advice. Trading foreign exchange, CFDs and cryptocurrencies carries a high level of risk and may not be suitable for everyone. You can lose more than you expect, and past performance does not guarantee future results. Only trade with capital you can afford to lose. Disclaimer.