Risk reward ratio calculator
Risk-to-reward ratio from three prices and the win rate needed to break even.
Fill in the fields and the result will appear here automatically.
Compares the entry-to-stop distance with the entry-to-target distance. Size is optional and only needed for money totals; the ratio comes from three prices. Ratio 3 gives a 25% break-even win rate, while 0.5 gives about 66.67%. This is a conditional threshold for repeated identical payoffs before costs, not a forecast of probability, target realism or trade quality. Prices on the wrong side for the chosen direction produce a warning.
How it works
Formula and logic
Risk per unit a=|entry−stop|>0 and potential reward b=|target−entry|. Ratio R=b/a; break-even percentage p=100/(1+R). With size q>0, money totals are q×a and q×b; blank or zero size omits them. A long needs stop<entry<target; a short needs target<entry<stop. Distances remain calculated for invalid ordering, but a warning prevents treating that as a correctly specified trade. Fees, gaps and varying outcomes across trades are not modeled.
Example
Entry 250, stop 240, target 280 gives a ratio of 3: winning 25% of trades is enough to break even. With the same prices and blank size, ratio 3 and rate 25% remain, but money totals are absent. Target equal to entry gives ratio 0 and threshold 100%, with a warning that target ordering is invalid.
Fields and units
- Trade direction — list option
- Entry price — $
- Stop price — $
- Target price — $
- Size, units — unitless
How to use
- — Choose the direction: a long stops below entry, a short above it.
- — Enter the entry price, the stop price and the target price.
- — Enter the size if you want risk and reward in money.
- — Compare the break-even rate with your own trade statistics.
Method and limitations
- Calculation method
- Formula and logic
- Data or methodology source
- Investor.gov, US SEC, 18 August 2026: stop price is not guaranteed; stop-limit may remain unfilled
- Limitation
- Ratio and break-even rate assume identical wins and losses before costs. They predict neither price movement nor target probability; the price-ordering warning must be considered.
FAQ
How does this differ from position sizing?
Position sizing derives units from a risk budget. Here size is entered separately and the ratio compares two distances. Neither measure alone assesses trade quality or probability.
What does the break-even win rate show?
It is the threshold for a series with constant win and loss amounts before costs: R=3 gives 25%, R=1 gives 50%, and R=0.5 gives 66.67%. It does not predict your actual win rate; varying outcomes require the full series.
What ratio is considered acceptable?
There is no universally acceptable ratio. R=2 needs more than 33.33% wins for a positive average before costs with identical payoffs. Without probabilities and costs, the ratio alone cannot determine profitability.
Why are the distances taken as magnitudes?
Because a short stops above entry and targets below it, so the sign of the difference depends on direction. Risk and reward are magnitudes, not directions.
Are fees included?
No. A net-payoff ratio needs costs separately deducted from potential gains and added to modeled losses. The difference can be substantial; this calculation does not estimate its size.