Risk-Reward Ratio Calculator
Trade R:R analysis.
Calculate risk-reward ratio and break-even win rate for any trade using entry price, stop loss, and profit target inputs.
What this tool does
Risk-reward ratio measures the relationship between potential profit and potential loss on a trade. Enter your entry price, target price, and stop loss level, and the calculator returns two outputs: the ratio itself (showing how much upside potential exists relative to downside risk) and the break-even win rate (the minimum percentage of winning trades needed to avoid losses over time, assuming consistent position sizing). The ratio is calculated by dividing the distance to your target by the distance to your stop loss. This tool illustrates how these metrics interact and helps traders model different entry and exit scenarios. Results are for educational illustration only and assume fixed position sizes with no slippage or fees.
Quick answer: with the default values, the result is 2.00:1 (Reward/Risk Ratio). Adjust the values below for your own figures.
Enter Values
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Formula Used
Disclaimer
Results are estimates for educational purposes only. They do not constitute financial advice. Consult a qualified professional before making financial decisions.
Risk-reward ratio compares potential reward to potential risk per trade. Formula: (target price - entry) / (entry - stop loss). A ratio of 2:1 or better is commonly cited as favourable, where the reward is at least twice the risk. 50 entry, 55 target, 45 stop = 5 reward / 5 risk = 1:1 (poor). 50 entry, 60 target, 45 stop = 10 / 5 = 2:1 (good).
Example: stock at 100, target 120, stop 90. Reward = 20, Risk = 10. R:R = 2:1. A win rate above 33% gives positive expected value here (1/(1+2) = 33% break-even). At a 50% win rate the expected value is clearly positive, and it rises further at 60%. Lower R:R requires a higher win rate; higher R:R can hold positive expected value with a lower win rate.
R:R + win rate = expected value: EV = (Win% × Reward) - (Loss% × Risk). 50% win rate, 2:1 R:R: EV = (0.5 × 2) - (0.5 × 1) = +0.50 per 1 risked. Positive EV means the strategy gains on average over many trades. A commonly cited pairing is a high R:R (2:1+) with a moderate win rate (40-60%). Strategies needing 70%+ win rate (low R:R) rarely survive long-term.
Quick example
With entry price of 100 and target price of 120 (plus stop loss of 90), the result is 2.00:1. Change any figure and watch the output shift — it's often more useful to see the pattern than to memorise the formula.
Which inputs matter most
You enter Entry Price, Target Price, and Stop Loss. Not every input has equal weight. Adjusting one input at a time toward extreme values shows which ones move the result most.
What's happening under the hood
R:R = (target - entry) / (entry - stop). Break-even win rate = 1/(1 + R:R). The formula is listed in full below. If the number looks off, you can retrace the calculation by hand — that's the point of showing the working.
What this doesn't capture
This is a simplified model that holds its assumptions constant. Real outcomes vary with market conditions, costs, taxes, and timing, so the figure is best read as one scenario rather than a forecast.
Entry £100, Target £120, Stop £90 = 2.00:1.
Inputs
| Potential Reward | $20.00 |
|---|---|
| Potential Risk | $10.00 |
| Break-Even Win Rate | 33.33% |
| Rating | Good (2:1+) |
This example uses typical values for illustration. Adjust the inputs above to match a specific situation and see how the result changes.
Sources & Methodology
Methodology
The calculator computes the risk-reward ratio by dividing potential profit by potential loss. Specifically, it subtracts the entry price from the target price to find upside distance, then subtracts the stop-loss price from the entry price to find downside distance. The ratio is the upside divided by the downside. The calculator also derives a break-even win rate by applying the formula 1/(1 + R:R), which models the minimum win frequency needed to offset losses at the specified ratio. The model assumes linear price movement between entry and target levels, constant position sizing, and no transaction costs or slippage. It does not account for market volatility, execution risk, or the probability of reaching either target or stop-loss prices. The calculation assumes a long position, where the target sits above the entry and the stop below it; for a short position these distances invert.
Frequently Asked Questions
Best R:R for trading?
How to set stops/targets?
R:R vs win rate trade-off?
Why R:R alone isn't enough?
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