Risk / Reward Calculator
Evaluate trade payoff symmetry before risking capital. Calculate your exact Risk-to-Reward (R:R) ratio and determine the minimum win rate required to maintain statistical profitability.
Trade Parameters
Input parameters to compute exact risk and positioning
Calculation Results
Institutional risk output
What is Risk-to-Reward Ratio?
The Risk-to-Reward (R:R) ratio compares the potential loss of a trade (the distance to your Stop Loss) against the potential gain (the distance to your Take Profit). A favorable R:R ratio allows a trader to remain profitable over a sample of trades even with a win rate below 50%.
How Does It Work?
The calculator measures the numerical distance between your entry price and stop loss (Risk Distance) and compares it directly to the distance between your entry price and take profit (Reward Distance). It also computes your mathematical breakeven win rate: 100 / (1 + RR).
Mathematical Formula
Worked Numerical Example
Example: EUR/USD BUY Setup
- Entry: 1.0850
- Stop Loss: 1.0820 (30 pips risk)
- Take Profit: 1.0940 (90 pips target)
- R:R Ratio: 90 / 30 = 1 : 3.00
- Breakeven Win Rate: 100 / (1 + 3) = 25.0% (You only need to win 26 out of 100 trades to make money!)
Common Mistakes Traders Make
- Accepting negative risk/reward ratios (e.g. risking $300 to make $100), where one bad trade wipes out multiple winners.
- Setting unrealistic Take Profit targets in order to force a high theoretical R:R ratio that the market never reaches.
Professional Risk Management Advice
Aim for an average realized R:R ratio of at least 1:2. At 1:2 R:R, winning just 40% of your trades yields a solid positive mathematical expectancy over time.
Frequently Asked Questions
Can a trader make money with a 35% win rate?
Yes. If your average trade yields a 1:3 R:R, a 35% win rate generates substantial positive net profit. 35 wins * $300 = $10,500 gross profit vs 65 losses * $100 = $6,500 gross loss, yielding $4,000 net profit.