Risk/Reward Calculator
Calculate your risk/reward ratio, expected value, and breakeven win rate before every trade.
Risk/Reward Ratio Calculator
Know If a Trade Is Worth Taking
Calculate your risk/reward ratio, expected value, and breakeven win rate before every trade. With a 1:2 R/R, you only need to win 33% of trades to be profitable. This tool shows whether a trade is worth your capital.
- 3:1 or higher is considered excellent risk/reward
- Expected value shows average profit per trade over time
- Always calculate R/R before entering any trade position
Enter entry, stop loss, and target to calculate
Risk Management Principles
The 1% Rule
Never risk more than 1-2% of your account on a single trade. This ensures a losing streak won't devastate your capital.
Minimum 1:2 R/R
Always aim for at least 2x reward for every 1x risk. With 1:2 R/R, you only need to win 33% of trades to be profitable.
Always Use Stops
Set your stop loss before entering the trade. A trade without a stop has unlimited risk potential.
| R/R Ratio | Breakeven Win Rate | Quality |
|---|---|---|
| 1:1 | 50% | Risky |
| 1:1.5 | 40% | Acceptable |
| 1:2 | 33% | Good |
| 1:3 | 25% | Excellent |
| 1:4 | 20% | Excellent |
Frequently Asked Questions
What is a good risk/reward ratio?
A minimum 1:2 risk/reward ratio is recommended, meaning you stand to gain at least $2 for every $1 you risk. Many professional traders aim for 1:3 or higher. With a 1:2 ratio, you only need to win 33% of trades to break even.
How do I calculate risk/reward ratio?
Divide your potential profit (target price minus entry) by your potential loss (entry price minus stop loss). For example: Entry at $100, stop at $95, target at $115 gives (115-100)/(100-95) = 15/5 = 3:1 risk/reward.
What is expected value in trading?
Expected value (EV) combines your win rate with risk/reward to show your average profit per trade. A positive EV means you'll be profitable over many trades. EV = (Win Rate × Reward) - (Loss Rate × Risk).
Should I always use stop losses?
Yes, always use stop losses. They protect your capital by automatically exiting losing trades at a predetermined level. Without stops, a single bad trade can wipe out many winning trades.
How does win rate affect profitability?
Win rate alone doesn't determine profitability - risk/reward matters too. A 40% win rate with 1:3 R/R is more profitable than a 60% win rate with 1:1 R/R. Focus on finding trades with high R/R, not just high probability.