Risk/Reward Calculator
Calculate your trade's risk/reward ratio and required win rate for profitability
Trade Setup
Risk: 5.00% from entry
Reward: 15.00% from entry
Enter to calculate potential P&L in dollars
Risk/Reward Ratio
Price Levels
Understanding Risk/Reward Ratio
What is R:R Ratio?
The Risk/Reward ratio compares your potential loss (risk) to your potential gain (reward). A 1:2 ratio means you stand to gain $2 for every $1 you risk. It's a fundamental concept in risk management that helps traders make mathematically sound decisions.
Why 1:2 or Higher?
With a 1:2 R:R ratio, you only need to win 33% of your trades to break even. This gives you room for error while still being profitable. Professional traders often aim for 1:2 or higher to ensure long-term profitability.
Breakeven Win Rates
| R:R Ratio | Win Rate Needed | Assessment |
|---|---|---|
| 1:0.5 | 66.7% | Very Difficult |
| 1:1 | 50.0% | Challenging |
| 1:2 | 33.3% | Recommended |
| 1:3 | 25.0% | Excellent |
| 1:4 | 20.0% | Outstanding |
You can be wrong more than half the time and still profit.
Need ~40% win rate. Requires good trade selection.
Avoid! You need to win most trades just to break even.
Frequently Asked Questions
How do I set a good stop loss?
Place your stop loss at a level where your trade idea is invalidated - typically below support for long trades or above resistance for short trades. Avoid placing stops at round numbers or too tight (noise can stop you out).
Should I always aim for 1:3 R:R?
Not necessarily. A realistic take profit based on market structure is better than an arbitrary target. A 1:2 with 50% win rate is more profitable than 1:3 with 20% win rate. Balance R:R with probability of success.
What if my R:R is below 1:1?
Generally, avoid trades with R:R below 1:1 unless you have a very high probability setup (scalping, mean reversion). For most strategies, wait for better setups or adjust your entry/exit levels to improve the ratio.
How does position sizing affect risk?
Position size determines your actual dollar risk. A common rule is to risk no more than 1-2% of your account on any single trade. Use the position size field to calculate your exact dollar exposure before entering a trade.
Disclaimer: This calculator is for educational purposes only and does not constitute financial advice. Trading involves substantial risk of loss. Past performance is not indicative of future results. Always use proper risk management and never risk more than you can afford to lose.
Free Risk/Reward Calculator by Money365.Market
Educational purposes only. Not financial advice.