Risk-Reward Ratio Calculator
Evaluate a potential trade before entering the market. Calculate your risk, potential reward, reward-to-risk ratio, break-even win rate, and estimated position size using your entry, stop-loss, and target prices.
Trade Details
Enter your planned prices and account risk settings.
Trade Analysis
Your calculated trade metrics appear here.
How to Use the Risk-Reward Ratio Calculator
Analyze a long or short trade in four straightforward steps.
Select Trade Direction
Choose a long trade when expecting the price to rise or a short trade when expecting the price to decline.
Enter Your Prices
Add the planned entry price, protective stop-loss price, and expected take-profit target.
Add Account Risk
Enter your balance and preferred risk percentage to estimate a position size based on your maximum loss.
Review the Results
Check the ratio, break-even win rate, maximum risk, position size, and potential profit before making a decision.
What Is a Risk-Reward Ratio?
A practical trading metric for comparing potential profit with possible loss.
The risk-reward ratio compares the amount a trader may lose on a position with the amount they expect to gain. It helps traders evaluate whether a proposed setup offers enough potential reward to justify the risk.
For example, a reward-to-risk ratio of 1:3 means the trader is risking one unit to potentially earn three units. If the maximum planned loss is $100, the expected profit at the target price would be $300.
How the Calculator Works
For a long position, risk is calculated by subtracting the stop-loss price from the entry price. Potential reward is calculated by subtracting the entry price from the target price.
For a short position, risk is calculated by subtracting the entry price from the stop-loss price. Potential reward is calculated by subtracting the target price from the entry price.
Long Trade Calculation
Reward = Target Price − Entry Price
Short Trade Calculation
Reward = Entry Price − Target Price
Risk-Reward Ratio Example
Assume a trader plans to purchase an asset at $100, place a stop-loss at $95, and set a profit target at $115. The risk per unit is $5, while the potential reward per unit is $15.
| Trade Metric | Value | Calculation |
|---|---|---|
| Entry Price | $100 | Planned purchase price |
| Stop-Loss Price | $95 | $100 − $95 = $5 risk |
| Target Price | $115 | $115 − $100 = $15 reward |
| Reward-to-Risk Ratio | 1:3 | $15 ÷ $5 = 3 |
| Break-Even Win Rate | 25% | 1 ÷ (1 + 3) × 100 |
What Is a Good Risk-Reward Ratio?
A good ratio depends on the trading strategy, asset volatility, win rate, transaction costs, and market conditions. Many traders look for setups with a potential reward of at least two times the planned risk, represented as 1:2 or higher.
However, a higher ratio does not automatically make a trade profitable. A strategy must also have realistic targets, disciplined stop-loss placement, consistent execution, and a sufficient probability of success.
Calculator Results Explained
Understand each metric before using it in your trade planning.
Reward-to-Risk Ratio
Shows how much potential reward is available for every one unit of capital placed at risk.
Risk per Unit
Measures the price distance between your entry point and protective stop-loss.
Reward per Unit
Measures the expected price movement between your entry and take-profit target.
Break-Even Win Rate
Estimates the minimum theoretical win rate required to break even before fees, spread, or slippage.
Position Size
Estimates the number of units you can trade while staying within your selected account risk limit.
Potential Profit
Estimates the monetary profit if the calculated position reaches the selected target price.
Frequently Asked Questions
Common questions about calculating and interpreting risk-reward ratios.