Risk Reward Ratio Calculator
The ratio, and the win rate it demands before you make money.
Win rate each ratio demands
| Reward : risk | Break-even win rate |
|---|---|
| 0.5 : 1 | 66.67 % |
| 1 : 1 | 50.00 % |
| 1.5 : 1 | 40.00 % |
| 2 : 1 | 33.33 % |
| 3 : 1 | 25.00 % |
| 4 : 1 | 20.00 % |
| 5 : 1 | 16.67 % |
How it works
Reward-to-risk on its own says nothing about whether a strategy makes money. Paired with a win rate it says everything: at a ratio of R the break-even win rate is 1/(1+R), so 1:1 needs better than half your trades to work, 2:1 needs a third, and 3:1 needs a quarter.
Fees move that bar, and by more than their size suggests. They widen the loss and shrink the win at the same time, so a nominal 3:1 trades as roughly 2.87:1 at ordinary taker rates — and on a target only a few hundred points wide, the same fee eats a third of the edge instead of a twentieth.
Related calculators
How the Risk Reward Ratio Calculator works
This risk reward calculator uses entry, stop-loss and take-profit prices to calculate the reward-to-risk ratio. It also shows the effective ratio after trading fees, the break-even win rate and expectancy at the win rate you enter. Before costs, the break-even win rate is 1 ÷ (1 + reward-to-risk).
This page answers the ratio question only. How much of the account that stop is allowed to cost is a different calculation — the position size calculator converts a risk budget into a quantity, and the risk of ruin simulator checks whether a run of those trades survives.
Risk-to-reward 1:2 and reward-to-risk 2:1
A trade risking $50 to target $100 has risk-to-reward of 1:2 and reward-to-risk of 2:1. Both describe the same setup. This calculator displays reward divided by risk, so that setup reads 2.00 R. Check which quantity comes first when comparing ratios from different tools.
For a long, risk per unit is entry − stop and reward per unit is target − entry. For a short, risk is stop − entry and reward is entry − target. Position quantity changes the dollar amounts but leaves the ratio unchanged.
A worked example with fees and break-even win rate
Enter a long at $100, a stop at $95, a target at $110 and a quantity of 10. With no fees, the loss is $50 and the win is $100: 2.00 R, requiring a 33.33% win rate to break even. At a 40% win rate, expected profit is $10 per trade.
Now enter an illustrative fee of 0.1% per fill. Entry costs $1, a stop exit costs $0.95 and a target exit costs $1.10. The loss becomes $51.95 and the net win $97.90. Break-even win rate = loss ÷ (loss + win), so it rises to 34.67%; expected profit at 40% falls to $7.99. These figures assume fills at the entered prices and exclude slippage and funding payments.
| Trading fees | Net win / loss | Reward-to-risk | Break-even win rate |
|---|---|---|---|
| None | $100.00 / $50.00 | 2.00 R | 33.33% |
| 0.1% per fill | $97.90 / $51.95 | 1.88 R | 34.67% |
The ratio and the win rate are one number, not two
Traders quote reward-to-risk as if a higher figure were self-evidently better, and win rate as if a higher figure were self-evidently better. Neither is true in isolation. A 5:1 setup that fills one time in ten is a losing strategy; a 1:2 setup that wins eight times in ten is a good one.
The only question worth asking is whether your win rate clears the bar your ratio sets. Break even at 1:1 needs better than 50%, at 2:1 a third, at 3:1 a quarter. Everything above that line is edge and everything below it is a slow refund to the exchange.
Fees move the bar more than they look like they should
A fee is charged on entry and on whichever exit fills, so it increases the loss and reduces the win. Use the effective ratio for the break-even calculation: a nominal ratio alone leaves those costs out.
For a given fee rate, costs consume a larger share of a narrow price target. The exact share depends on entry, exit and quantity; the fee calculator shows the break-even exit price separately.
Where the ratio comes from matters
A ratio computed from a stop placed where the idea is genuinely invalidated is information. A ratio computed by moving the stop closer until the number looks good is a story about the number, not about the trade — and the tighter stop simply gets hit more often, which shows up in the win rate the calculator asks you for.
The honest sequence is stop first, target second, ratio third, and position size last. Reversing it produces plans that look excellent on paper and lose money in a way that is very hard to diagnose.
FAQ
How do I calculate a risk reward ratio?
Divide the distance from entry to target by the distance from entry to stop. Entry $100, stop $95 and target $110 give 10 ÷ 5 = 2, displayed here as 2.00 R. That is reward-to-risk 2:1, or risk-to-reward 1:2. After fees, divide the net win by the total loss instead.
What is a good risk-reward ratio?
There is no threshold that is good on its own. 2:1 with a 40% win rate is profitable; 2:1 with a 25% win rate is not. The useful test is whether your measured win rate clears 1/(1+R) with enough margin to survive the variance around it.
Why is my break-even win rate higher than 1/(1+R)?
Fees. They are charged on both legs, so the loss is slightly larger than the stop distance and the win slightly smaller than the target distance. The calculator shows both the nominal ratio and what remains after costs.
What is an R-multiple?
The result of a trade expressed as a multiple of what it risked: exit at the target of a 3:1 plan and you have made 3R. It is the only unit that stays comparable between trades of different sizes, which is what makes a track record readable rather than a list of amounts.
How many trades before I trust my win rate?
A small sample can give an unstable estimate, and even a large sample may stop representing a strategy when conditions change. The risk of ruin simulator assumes the entered win rate is constant; compare several plausible win rates rather than treating one sample as certain.