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.
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How the Risk-Reward Ratio Calculator works
A risk-reward calculator divides the distance to your target by the distance to your stop. That number alone says nothing about whether a strategy makes money — paired with a win rate it says everything, because at a ratio of R the break-even win rate is exactly 1/(1+R).
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 the way in and again on the way out, so it widens the loss and shrinks the win simultaneously. Both ends of the ratio move against you, which is why a nominal 3:1 trades as roughly 2.87:1 at ordinary taker rates.
The damage scales inversely with the size of the move. On a 6,000-point target the round trip costs about a twentieth of the edge; on a 200-point scalp it takes a third. This is the arithmetic reason high-frequency strategies live or die on the fee schedule rather than on the signal.
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
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?
More than feels reasonable. At a true 40% win rate, thirty trades routinely produce anything between 25% and 55% by chance alone. Use the risk of ruin simulator to see what that uncertainty does to an account before betting sizing decisions on a short sample.