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Risk Reward Ratio Calculator

Compare potential upside against downside and find the win rate needed to be profitable.

About Risk Reward Ratio Calculator

A 3:1 reward-to-risk ratio only needs a 25% win rate to break even, which is why ratio and win rate must always be judged together. Expectancy combines them into the single number that decides whether a strategy makes money. Traders optimise win rate and ignore the ratio, which is how a strategy that wins 70% of the time still loses money.

Formula

Risk Reward Ratio

Reward:risk = (target − entry) ÷ (entry − stop); break-even win rate = 1 ÷ (1 + reward:risk)

expectancy
Average gain per unit of risk taken, given the win rate

Worked example

With the default values below, Risk Reward Ratio Calculator returns Reward to Risk Ratio of 3.000. Change any input above and every figure here is recalculated in your browser.

Inputs used

Entry priceminimum 0.01
60
Target priceminimum 0
75
Stop-loss priceminimum 0
55
Expected win rateaccepts 0–100 %
45 %

Results

Reward to Risk Ratio
3.000
Win Rate Needed to Break Even
25.00%
Expectancy per Unit of Risk
0.8000
Potential Gain per Share
$15.0000
Verdict
Positive expectancy at this win rate

Step by step

  1. 1Values used
  2. 2Risk Reward Ratio
  3. 3Reward to Risk Ratio= 3.000
  4. 4Win Rate Needed to Break Even= 25.00
  5. 5Expectancy per Unit of Risk= 0.8000
  6. 6Potential Gain per Share= 15.0000
  7. 7Verdict= Positive expectancy at this win rate

Assumptions and limits

  • The result is derived only from the 4 inputs listed above. Anything not among them is not part of the calculation.
  • In particular, this calculator does not take inflation, tax, fees or charges or compounding frequency into account.
  • Figures are rounded for display to 4 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.
  • This is an estimate for general information and not professional financial, tax or legal advice. See the full disclaimer for the limits that apply to this kind of calculator.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

Frequently Asked Questions

How is Risk Reward Ratio calculated?

Reward:risk = (target − entry) ÷ (entry − stop); break-even win rate = 1 ÷ (1 + reward:risk) A 3:1 reward-to-risk ratio only needs a 25% win rate to break even, which is why ratio and win rate must always be judged together. Expectancy combines them into the single number that decides whether a strategy makes money.

Why does Risk Reward Ratio matter?

Traders optimise win rate and ignore the ratio, which is how a strategy that wins 70% of the time still loses money.

What values do I need to enter?

This calculator takes 4 inputs: Entry price, Target price, Stop-loss price, Expected win rate. The pre-filled defaults are a realistic starting point — replace them with figures from your own environment for a result you can act on.

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