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Risk/Reward Calculator
Your risk/reward ratio from entry, stop and target, and the win rate it takes to break even.
- Risk : reward
- 1 : 3.00
- Direction
- Buy (long)
- Win rate to break even
- 25.0%
- Potential profit
- $300.00
Break-even ignores spread and commission, which push the real figure a little higher.
How it works
- Ratio
|target − entry| ÷ |entry − stop|- Break-even win rate
risk ÷ (risk + reward)
Worked example
- Buy EUR/USD at 1.0800, stop at 1.0770 (30 pips), target at 1.0890 (90 pips).
- 90 ÷ 30 gives a ratio of 1 : 3.
- 30 ÷ (30 + 90) = 25%. Winning one trade in four breaks even, before costs.
A good ratio is not enough on its own
A 1 : 5 target sounds attractive, but if price rarely gets that far the win rate falls and the ratio does not help. The ratio and the win rate have to be judged together.
When a signal service advertises a high win rate, check its ratio. A 90% win rate with a 1 : 0.1 ratio loses money once costs are added.
Questions
What is a good risk/reward ratio?
There is no single answer. 1 : 2 needs a win rate above 33% to break even, and 1 : 1 needs above 50%. What matters is that your real win rate beats the break-even figure.
Does this work for sell trades?
Yes. A target below the entry is treated as a sell, and the stop must then be above the entry.
How do signals with several take-profit levels work?
Work out the ratio for each level and the share of the position closed there. The overall ratio is the weighted average.