Risk/Reward Calculator
Check your risk/reward ratio before entering any trade. See the minimum win rate you need to stay profitable at this R:R level.
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The risk/reward ratio (R:R) compares how much you stand to lose versus how much you stand to gain on a trade. It is one of the most important pre-trade checks a trader can make.
R:R Ratio = (Take Profit − Entry) / (Entry − Stop Loss)
A ratio of 3:1 means you are risking $1 to potentially make $3. The higher the ratio, the fewer winning trades you need to be profitable overall.
Example:
Entry: $150.00 | Stop Loss: $147.00 | Take Profit: $159.00
Risk: $3.00 per share | Reward: $9.00 per share
R:R = $9.00 / $3.00 = 3:1 (breakeven win rate: 25%)
Why R:R Matters
Win rate alone does not determine profitability. A trader who wins 40% of the time with a 3:1 R:R earns more than a trader who wins 60% of the time with a 0.5:1 R:R. The math works like this:
- 1:1 ratio: You need to win more than 50% of trades to be profitable.
- 2:1 ratio: You only need to win above 33.3% of trades.
- 3:1 ratio: You only need to win above 25% of trades.
Tips for Improving Your R:R
- Tighten your stop loss: A closer stop increases your R:R, but make sure it still respects the chart structure. Do not place stops where you will get stopped out by normal volatility.
- Extend your target: Look for trades near key support/resistance levels that offer natural targets further away from your entry.
- Be selective: Skip trades that offer less than a 2:1 ratio. Being patient about which trades you take is one of the simplest ways to improve your overall performance.
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Frequently Asked Questions
What is a good risk/reward ratio?
A risk/reward ratio of 2:1 or higher is generally considered good. This means your potential profit is at least twice your potential loss. Many professional traders will not take a trade below 2:1, while swing traders often aim for 3:1 or higher.
How do you calculate risk/reward ratio?
Divide the potential reward (take profit minus entry) by the potential risk (entry minus stop loss). For example, if you enter at $100 with a stop at $97 and a target at $109, the R:R is ($109 - $100) / ($100 - $97) = 9 / 3 = 3:1.
What win rate do I need to be profitable?
The breakeven win rate depends on your risk/reward ratio. At 1:1 R:R, you need above 50%. At 2:1, you only need above 33.3%. At 3:1, above 25%. The higher your R:R ratio, the lower the win rate required to stay profitable.
Does risk/reward ratio matter more than win rate?
Neither metric matters in isolation. What matters is the combination: a trader with a 40% win rate and a 3:1 R:R is more profitable than a trader with a 60% win rate and a 0.8:1 R:R. This calculator shows both metrics so you can evaluate the full picture.