Risk/Reward Calculator
Evaluate any trade setup by calculating the risk-to-reward ratio and the minimum win rate needed to break even.
Free — no signup, no ads, instant results
Inputs
Results
Risk/Reward Ratio
1 : 3.00
Break-Even Win Rate
25.0%
Risk (per unit)
$5.00
Reward (per unit)
$15.00
Who Is This For?
Traders who want to evaluate whether a trade setup is worth taking before entering. Works for any market — forex, stocks, crypto, options.
Understanding Risk/Reward Ratios
The risk/reward ratio compares how much you stand to lose versus how much you could gain on a trade. A ratio of 1:3 means you risk $1 to potentially make $3.
With a 1:2 risk/reward ratio, you only need to win 33% of your trades to break even. This is why experienced traders focus on setups with favorable R:R ratios — it allows them to be profitable even with a moderate win rate.
Use GrandAlgo indicators to identify high-probability entries with optimal risk/reward setups. For more on improving your edge, read about why confluence trading matters and how to backtest your strategy.
How Risk-Reward Ratio Works
The risk-reward ratio formula for long trades is: R:R = (Take Profit - Entry) / (Entry - Stop Loss)
For example, if you buy at $100 with a stop loss at $95 and a target at $115: risk = $5, reward = $15, giving you a R:R = $15 / $5 = 3:1.
The break-even win rate varies with your R:R ratio. At 1:1 you need to win 50% of trades. At 2:1, the break-even drops to 33.3%. At 3:1, you only need to win 25% of the time. This is why higher R:R ratios give you more room for error, as long as your win rate stays above the break-even threshold.
How to Use This Calculator
1. Enter your entry price
Input the price at which you plan to enter the trade. This is the reference point for both risk and reward calculations.
2. Enter your stop loss price
Input the price where your stop loss will be placed. The distance from entry to stop loss defines your risk per unit.
3. Enter your take profit price
Input your target exit price. The distance from entry to take profit defines your potential reward per unit.
4. Read the R:R ratio and break-even win rate
The calculator displays your risk-to-reward ratio and the minimum win rate needed to break even. If the break-even win rate is higher than your historical win rate, the setup may not be worth taking.
Worked Example
Step 1: Long entry at $100, stop loss at $95, take profit at $115.
Step 2: Risk = $5, reward = $15.
Step 3: R:R = $15 / $5 = 3:1.
Result: Breakeven win rate = 1 / (1 + 3) = 25%.
Assumptions & Edge Cases
- Assumes the trade hits either stop loss or take profit exactly (no partial fills).
- Does not factor in commissions or slippage.
- Breakeven win rate assumes consistent R:R across all trades.
Frequently Asked Questions
A minimum of 1.5:1 is recommended for most trading strategies. 2:1 or higher is ideal because it means you can be wrong on more than half your trades and still be profitable. However, R:R alone doesn’t determine profitability — it must be paired with a win rate that exceeds the break-even threshold.
Divide 1 by (1 + R:R ratio). At 2:1, break-even = 1 / (1 + 2) = 33.3%. This means you only need to win 1 out of every 3 trades to break even. Any win rate above that threshold generates profit over time.
Not necessarily. Higher R:R trades typically have lower win rates because the target is further away. A 5:1 trade sounds great but might only hit 15% of the time, which is below the 16.7% break-even. The best approach is finding the R:R that maximizes your strategy’s expected value — win rate × reward minus loss rate × risk.