Finance

Risk-Reward Ratio Calculator (R:R)

Q: How do you calculate risk-reward ratio?

**R:R = (Take-Profit − Entry) / (Entry − Stop-Loss)**. Divide your potential reward by your potential risk. Example: entry $100, SL $95, TP $115 → R:R = 15/5 = **1:3**.

Q: What is a good risk-reward ratio for trading?

**1:2** is the professional minimum: risk $1 to make $2, requiring only a 33% win rate to be profitable. Many professional traders target **1:3** or better. Below 1:1.5, you need a win rate above 40% consistently—difficult to sustain.

Q: What's the minimum win rate I need for a given R:R?

Use: **Win Rate = 1 / (1 + R)**. For 1:2 → 33%. For 1:3 → 25%. For 1:1 → 50%. This is your mathematical break-even threshold — you must beat it to be profitable.

Q: Does a high R:R guarantee profit?

No. A good R:R gives you *mathematical edge*, but only if you achieve the required win rate. A 1:5 ratio with a 10% win rate still loses money. You need both: a good ratio *and* disciplined execution.

Q: Should I calculate R:R before or after entering a trade?

Always **before**. R:R is a pre-trade filter — its purpose is to decide whether to enter. Calculating it after entry doesn't help you make better decisions; it only creates cognitive bias to justify a bad setup.

Calculate your risk-reward ratio in seconds: enter your entry, stop-loss and take-profit to get the exact R:R, minimum win rate to break even, and total P&L. Professional minimum: 1:2.

Data verified · June 2026
Edited by Martín Rodríguez
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The Risk/Reward Ratio (R:R) is the single most important metric for deciding whether a trade is worth taking. It compares how much you're willing to risk (distance to your stop-loss) against how much you stand to gain (distance to your take-profit). An R:R of 1:2 means you risk $1 to make $2 — with just a 33% win rate, you're already profitable. This calculator takes your entry price, stop-loss, and take-profit and returns: your exact R:R, the minimum win rate needed to break even, absolute profit and loss amounts, and whether your trade meets the professional standard (minimum 1:2). Works with forex, stocks, crypto, futures, and options.

When to use this calculator

Filter trades before entering: if R:R < 1:2, skip it.
Compare two setups and choose the one with the better ratio.
Verify your strategy has positive mathematical expectancy.
Justify wider stops with even wider profit targets.
Teach new traders how edge and probability work together.

Win Rate Required to Break Even by R:R Ratio

R:R Ratio	Formula	Min. Win Rate	Interpretation
1:1	1 ÷ (1+1)	50%	Too tight
1:1.5	1 ÷ (1+1.5)	40%	Acceptable
1:2	1 ÷ (1+2)	33%	✅ Pro standard
1:3	1 ÷ (1+3)	25%	Excellent
1:4	1 ÷ (1+4)	20%	Very good
1:5	1 ÷ (1+5)	17%	Long-term swing
1:10	1 ÷ (1+10)	9%	Home-run only

Fuente: Investopedia — Risk/Reward Ratio (https://www.investopedia.com/terms/r/riskrewardratio.asp). Formula: Min. Win Rate = 1 ÷ (1 + R:R). A trade is break-even when (Win Rate × Reward) = (Loss Rate × Risk).

How it works

How to Calculate Risk-Reward Ratio

The formula is straightforward:

R:R = (Take-Profit − Entry) / (Entry − Stop-Loss)

If you enter at $100, set your SL at $95 and TP at $115:

Risk = $100 − $95 = $5

Reward = $115 − $100 = $15

R:R = 1:3

Important: R:R is always calculated in price units (points, pips, dollars per share), not in dollar risk per position. Position size is a separate calculation.

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Why R:R Alone Doesn't Guarantee Profit

R:R only makes sense paired with your actual win rate. A 1:5 ratio sounds impressive, but if you win 10% of the time you still lose money. The metric that actually matters is expectancy:

Expectancy = (Win Rate × Avg Win) − (Loss Rate × Avg Loss)

For a system with 1:2 R:R and 40% win rate:
(0.40 × 2) − (0.60 × 1) = 0.80 − 0.60 = +$0.20 per dollar risked

That $0.20 is positive edge. Below zero means you're paying the market over time.

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Win Rate Required to Break Even — Quick Reference

R:R	Min. Win Rate to Break Even	Notes
1:1	50%	Must beat the market consistently
1:1.5	40%	Minimum viable for most setups
1:2	33%	✅ Common professional benchmark
1:3	25%	Widely used in swing trading
1:4	20%	Practical for trend-following
1:5	17%	Suits high-volatility breakouts
1:10	9%	Rare; viable only in specific momentum strategies

Formula: Break-even win rate = 1 ÷ (1 + R:R)

These are break-even thresholds, not profit targets. To net positive after commissions and spreads, your realized win rate must exceed these values.

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The Role of Commissions and Spread

A 1:2 R:R on a $5 risk trade means you need a $10 move to profit. If your broker charges $1 in spread/commission per side, your effective risk becomes $6 and your effective reward drops to $9 — roughly a 1:1.5 ratio before you even start. This is critical for short-term traders where transaction costs consume a material fraction of each trade's range.

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R:R Across Asset Classes — Context

Forex day trading: Setups below 1:1.5 are generally not considered viable given typical spread costs.

Equity swing trading: Ratios of 1:2 to 1:3 are standard; position holding time of days to weeks allows for larger price targets relative to noise.

Options: R:R calculations require adjusting for the premium paid; a call option that doubles if the underlying moves 5% has a very different risk profile than a direct position.

Futures: Tick value must be converted to dollar risk before applying the formula; a 10-tick stop on ES futures equals $500, not 10 units of whatever price shows.

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Common Mistakes

1. Moving your target closer after entry: Destroys your pre-planned R:R. If market structure changes materially, that's a different decision — but do it systematically, not emotionally.
2. Widening your stop loss to avoid being stopped out: This increases risk without improving reward. Your R:R deteriorates, and the trade rationale (which defined the original stop) is likely already broken.
3. Calculating R:R after entering: Too late. R:R is a pre-entry filter used to decide whether a trade is worth taking, not a post-hoc justification.
4. Ignoring the actual target's probability: A 1:10 R:R is meaningless if the take-profit is beyond any realistic support/resistance or ATR range. High R:R must be structurally justified, not just arithmetically attractive.
5. Using R:R as the only position-sizing input: R:R tells you the shape of a trade, not how much to risk. Position size should be determined by your maximum acceptable dollar loss per trade (e.g., 1% of account), not by the R:R figure.

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What This Calculator Does NOT Include

Probability of each outcome — R:R is a mechanical ratio, not a probability estimate.

Commissions, swap rates, or overnight fees — these reduce your effective reward.

Slippage — in fast markets, your actual fill price may differ from your planned entry or stop.

Correlation between open positions — two trades with 1:2 R:R in correlated instruments behave as one concentrated position.

Tax treatment — realized gains and losses are subject to local tax law, which varies by jurisdiction.

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Quick Rule of Thumb

Most discretionary traders use 1:2 as their floor. Below that, the win rate required to stay profitable becomes difficult to sustain after accounting for costs and psychological pressure during drawdowns.

> ⚠️ Educational calculator only. Not financial advice. Trading financial instruments involves risk of significant or total loss of capital. Past performance does not guarantee future results. Consult a licensed financial advisor before making investment decisions.

Stock trade: Entry $100, SL $95, TP $115, 100 units

Risk per unit: $100 − $95 = $5.

Reward per unit: $115 − $100 = $15.

R:R = $15 ÷ $5 = 1:3 (excellent).

Total potential gain: $15 × 100 units = $1,500.

Total potential loss: $5 × 100 units = $500.

Break-even win rate: 1 ÷ (1 + 3) = 25% — win just 1 in 4 trades.

R:R 1:3 — excellent. Win just 1 out of every 4 trades and you break even.

Disclaimer: Informational estimate. Actual rates, fees, and terms depend on the provider and contract; compare official documents before deciding.

Frequently asked questions

How do you calculate risk-reward ratio?

R:R = (Take-Profit − Entry) / (Entry − Stop-Loss). Divide your potential reward by your potential risk. Example: entry $100, SL $95, TP $115 → R:R = 15/5 = 1:3.

What is a good risk-reward ratio for trading?

1:2 is the professional minimum: risk $1 to make $2, requiring only a 33% win rate to be profitable. Many professional traders target 1:3 or better. Below 1:1.5, you need a win rate above 40% consistently—difficult to sustain.

What's the minimum win rate I need for a given R:R?

Use: Win Rate = 1 / (1 + R). For 1:2 → 33%. For 1:3 → 25%. For 1:1 → 50%. This is your mathematical break-even threshold — you must beat it to be profitable.

Does a high R:R guarantee profit?

No. A good R:R gives you mathematical edge, but only if you achieve the required win rate. A 1:5 ratio with a 10% win rate still loses money. You need both: a good ratio and disciplined execution.

Does risk-reward ratio work the same in forex, stocks, and crypto?

Yes. R:R is completely market-agnostic — it only depends on three prices: entry, stop-loss, and take-profit. The math is identical for forex, stocks, crypto, futures, and options.

How do trading commissions affect my R:R?

Subtract commissions from your reward and add them to your risk. On crypto with 0.1% maker + 0.1% taker fees, a 1:2 gross ratio becomes roughly 1:1.8 net. Always calculate on net R:R, not gross.

Should I calculate R:R before or after entering a trade?

Always before. R:R is a pre-trade filter — its purpose is to decide whether to enter. Calculating it after entry doesn't help you make better decisions; it only creates cognitive bias to justify a bad setup.

Can I improve a bad R:R by moving my stop closer?

No — that makes it worse. Moving your stop closer increases the probability of being stopped out early without improving your reward. A bad R:R means skip the trade entirely, not try to engineer a better ratio by tightening stops.

Sources & references

Methodology & trust

Editorial

Finance calculator with its formula verified automatically against Investopedia — Risk/Reward Ratio, per our editorial policy and methodology.

Updates

Updated: June 2026. Parameters are verified periodically against the cited sources.

Privacy

Calculations run 100% in your browser. We do not store or transmit your data.

Limitations

Indicative results. For critical decisions, consult a professional.

📌 How to cite this calculator

Rodríguez, M. (2026). Risk-Reward Ratio Calculator (R:R). Hacé Cuentas. https://hacecuentas.com/en/risk-reward-ratio-trade

Content licensed under CC-BY 4.0 — reuse it citing the source with a link to Hacé Cuentas.

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