Risk Reward Calculator

Example: checking a setup before entry

Assume you are planning a long trade with an entry at 100, a stop loss at 98 and a take profit at 106.

The risk distance is 2 points. The reward distance is 6 points. That gives a risk/reward ratio of 1:3.

A 1:3 setup has a breakeven win rate of 25%, before costs such as spread, commission or slippage. That does not make the trade good by itself. It only shows the math behind the setup.

How the calculation works

This calculator compares the distance from entry to stop loss with the distance from entry to take profit.

Risk distance = distance between entry and stop loss

Reward distance = distance between entry and take profit

Risk/reward ratio = reward distance / risk distance

Breakeven win rate = 1 / (1 + risk/reward ratio)

The calculator handles both long and short trades. It does not include spread, commission, slippage or partial exits.

How to use this in trade review

Risk/reward is useful only if you compare planned risk/reward with what actually happened.

Useful review questions:

Was the target defined before entry?
Was the stop loss moved after entry?
Did you exit before your planned target?
Did the trade still make sense after costs?
Are your best trades coming from higher or lower risk/reward setups?

Over many trades, this helps show whether your results come from clean execution or from inconsistent exits.

Common questions

What is risk/reward ratio?

Risk/reward ratio compares how much you are risking on a trade with how much you could make if the planned target is reached. A 1:2 setup means the potential reward is twice the planned risk.

What is breakeven win rate?

Breakeven win rate is the win rate needed for a setup to break even before trading costs. For example, a 1:2 risk/reward ratio needs about a 33.33% win rate to break even before costs.

Is a higher risk/reward always better?

No. A higher reward target may be harder to reach. A trade can look good on paper but still perform badly if the target is unrealistic. The important thing is to review the result over many trades.

Does this include spread and commission?

No. This calculator uses clean price distances. For live trading, spread, commission and slippage can change the real risk/reward.

Related trading tools

Continue the risk review with these free browser-based tools:

Position Size Calculator
R-Multiple Calculator
Expectancy Calculator
Daily Loss Limit Calculator
Drawdown Recovery Calculator

Use this calculator on your website

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