Enter your entry, stop-loss, and target to get your risk/reward ratio and the win rate you'd need just to break even. Works for any market — stocks, crypto, forex, or futures. Long or short, the math is the same.
Position sizing (optional)
Nothing here is financial advice — it's for education only. Numbers are estimates and ignore fees, slippage, and taxes.
What is a good risk/reward ratio?
Risk/reward (R:R) compares how much you stand to lose if your stop is hit against how much you stand to gain at your target. A 1:2 ratio means you risk $1 to make $2. Most traders aim for 1:2 or better because a higher reward multiple lets you be wrong more often and still come out ahead. The ratio ties directly to your win rate: at 1:2, you only need to win about 33% of the time to break even; at 1:3, roughly 25%. A "good" R:R is one your strategy's real win rate can support — a 1:5 setup is worthless if you almost never reach the target.
How to calculate risk/reward
Risk is the distance from your entry to your stop-loss: risk = |entry − stop|. Reward is the distance from your entry to your target: reward = |target − entry|. Using absolute values means the same formula works for long and short trades. The ratio is reward ÷ risk, shown as 1 : X. The breakeven win rate is risk ÷ (risk + reward) × 100 — the percentage of trades you must win, at this exact R:R, just to end flat. If you add an account size and a risk %, position size = (account × risk%) ÷ risk per unit, potential loss equals your risk amount, and potential profit = position size × reward per unit.
FAQ
What is a risk/reward ratio?
It's the amount you risk on a trade compared to the amount you aim to gain. If your stop is $1 below entry and your target is $2 above, your risk/reward is 1:2 — you risk one to make two.
What's a good risk/reward ratio?
1:2 is a common baseline and 1:3 is considered strong, but "good" depends on your win rate. A high ratio you rarely hit is worse than a modest ratio you reach consistently. Match the ratio to how often your setups actually reach target.
How does win rate relate to risk/reward?
They're two halves of the same equation. The breakeven win rate is risk ÷ (risk + reward). At 1:1 you need to win 50%, at 1:2 about 33%, at 1:3 about 25%. Win above that rate at that ratio and you're profitable over time.
Does this work for any market?
Yes. Because the formula uses price distances and absolute values, it works for stocks, crypto, forex, and futures, and for both long and short positions. Just use the same price units for entry, stop, and target.
Should I always take 1:3+ setups?
No. A higher ratio only helps if your target is realistically reachable. Some strategies (like scalping) win often at 1:1 or lower and are still profitable, while a 1:3 target you hit 10% of the time loses money. Balance the ratio against your actual hit rate.
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