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MasterMath

Risk Reward Ratio Calculator

Entering at 50 with a 5% stop and a 15% target gives a 3-to-1 ratio, which means you only need to be right 25% of the time to break even.

Currency and number format for

Risk-reward ratio

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Risk-reward ratio—
Stop loss price—
Target price—
You risk per unit—
You gain per unit—
Win rate to break even—

How this was worked out

    Indicative result. Nothing here is investment advice. Stops do not guarantee an exit price: gaps and thin markets can fill you well below it.

    The formula

    ratio = reward per unit ÷ risk per unit · break-even win rate = 1 ÷ (1 + ratio)

    Where it comes from

    The ratio compares what you stand to make against what you stand to lose on a single trade. Its real value is the number it implies: the win rate you need just to stay level, which is what tells you whether a strategy is viable at all.

    How to work it out by hand

    1. Work out the stop price and the distance from entry to it
    2. Work out the target price and its distance from entry
    3. Divide the reward distance by the risk distance
    4. Break-even win rate is 1 divided by (1 + ratio)

    What is worth knowing

    The break-even win rate is the number that settles most arguments about strategies. At 3 to 1 you need 25% of trades to work; at 1 to 1 you need over 50% and every cost you pay comes straight out of the margin. That is why setting a wide target to flatter the ratio is self-defeating: a 10-to-1 ratio you never actually reach has a real win rate near zero. The ratio has to be judged against how often the target genuinely gets hit, not against how good it looks on paper. And a stop is an instruction, not a guarantee: on a gap or in a thin market you get filled wherever the next price is.

    Frequently asked questions

    What is a good risk-reward ratio?

    Anything above 1 to 1 is workable, and 2 or 3 to 1 is a common target. What matters more is whether your actual win rate clears the break-even rate that ratio implies.

    What is the break-even win rate?

    The proportion of trades that must reach the target for you to end up level. At 3 to 1 it is 25%; at 1 to 1 it is 50%, before costs.

    Can I just set a very distant target?

    You can, and the ratio will look excellent while your win rate collapses. The two have to be judged together.

    Does a stop guarantee my exit price?

    No. It becomes a market order when triggered. Gaps, news and thin liquidity can fill you well below the level you set.