Risk-Reward Ratio Calculator (R:R)
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.
The risk-reward ratio (R:R) is calculated as: **R:R = (Take-Profit − Entry) / (Entry − Stop-Loss)**. A ratio of 1:2 means you risk $1 to make $2 — you only need to win 33% of your trades to be profitable long-term. The professional minimum standard is **1:2**.
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.
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.
How it works
1 min readHow 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:
Win Rate Required by R:R — Quick Reference Table
| R:R | 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 |
The Math Behind Edge
The secret to profitable trading is positive expectancy:
Expectancy = (Win Rate × Avg Win) − (Loss Rate × Avg Loss)A trader with a 1:3 R:R needs only a 25% win rate to break even. A 1:1 R:R trader needs >50%. That's why professionals hunt asymmetric trades.
Common Mistakes
1. Moving your target closer after entry: Destroys your pre-planned R:R. Lock it in before you trade.
2. Widening your stop loss: Increases risk without improving reward. That's worse, not better.
3. Calculating R:R after entering: Too late — R:R is a pre-entry filter.
> ⚠️ Educational calculator only. Not financial advice. Markets carry risk of total loss. Consult a licensed advisor before trading.
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.