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Risk Reward Ratio Calculator
Plan a trade before you take it. Enter your entry, stop loss, take profit and position size, long or short, to see the money at risk, the potential reward, the risk/reward ratio and the minimum win rate a setup like this needs to be profitable.
Last updated:
Trade direction
$
$
$
units
Shares, coins, contracts × multiplier, or units of the instrument.
$
Commission and spread for entering and exiting; added to the risk and taken from the reward.
$
Shows the risk as a % of your account.
Enter your values to see the result.
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How to use the Risk Reward Ratio Calculator
- Choose long or short.
- Enter the entry price, stop loss and take profit. The calculator checks they are on the correct sides.
- Enter your position size and, optionally, fees and account size.
- Read the R:R ratio, risk and reward amounts and the break-even win rate.
- Use the tables to see expectancy at different win rates and targets for other R multiples.
Risk/reward formulas
- Risk per unit = |entry − stop loss|
- Reward per unit = |take profit − entry|
- Risk amount = risk per unit × position size (+ fees)
- Reward amount = reward per unit × position size (− fees)
- R:R = reward ÷ risk, usually written 1 : R
- Break-even win rate = 1 ÷ (1 + R)
- Expectancy per trade = win rate × reward − (1 − win rate) × risk
Example: buy 200 shares at $50 with a stop at $47.50 and a target at $57.50. Risk is $2.50 × 200 = $500, reward is $7.50 × 200 = $1,500, so R:R = 1 : 3. You only need to win more than 1 ÷ 4 = 25% of such trades to come out ahead, ignoring costs.
Break-even win rate by risk/reward ratio
| Risk : reward | Win rate needed to break even |
|---|---|
| 1 : 0.5 | 66.7% |
| 1 : 1 | 50.0% |
| 1 : 1.5 | 40.0% |
| 1 : 2 | 33.3% |
| 1 : 2.5 | 28.6% |
| 1 : 3 | 25.0% |
| 1 : 4 | 20.0% |
| 1 : 5 | 16.7% |
Using R:R sensibly
- Ratio and win rate go together. A far target gives a great ratio but is hit less often. What matters is expectancy: win rate × reward − loss rate × risk.
- Place the stop where the trade idea is wrong, not just where the ratio looks good, then size the position so the risk amount fits your plan (many traders risk 1% to 2% of their account per trade).
- Costs and slippage reduce reward and increase risk, especially for short-term trades with tight stops. Add round-trip fees to see the real ratio.
- Stops are not guaranteed: prices can gap past a stop order, making the actual loss bigger than planned.
Frequently asked questions
How do you calculate the risk/reward ratio?
Risk per unit is the distance from entry to stop loss and reward per unit is the distance from entry to take profit. Multiply each by the position size; the ratio is reward ÷ risk. A $2.50 risk and $7.50 reward per share is 1 : 3.
What is a good risk/reward ratio?
Many traders look for at least 1 : 2, but there is no universal answer. A strategy with a high win rate can be profitable at 1 : 1 or lower, while a trend-following strategy that wins rarely needs large ratios like 1 : 3 or more.
What win rate do I need to break even?
Break-even win rate = 1 ÷ (1 + R). At 1 : 1 you need 50%, at 1 : 2 about 33.3%, and at 1 : 3 25%. Fees and slippage push this a little higher.
Does it work for short trades?
Yes. For a short trade the stop loss is above the entry and the target below it. The calculator checks the order of the prices for the direction you choose.
How does this relate to position sizing?
Risk amount = risk per unit × position size. If you decide to risk a fixed amount (for example 1% of your account), divide it by the risk per unit to get the size. A position size calculator does this automatically.
Is this financial advice?
No. It is a planning tool that does arithmetic on the prices you enter. Trading involves risk of loss, and stop orders may fill at worse prices than expected.
Are all the tools on FreeToolCabin tested for quality and accuracy?
Yes! Every tool on our site undergoes automated Q/A testing in real browser environments to ensure high precision, correct output, and zero errors. If you happen to spot a bug or have a suggestion, please contact us at [email protected] and our team will review it right away.
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