Free tool
Risk/reward ratio calculator
Enter an entry, a stop and a target. Get the ratio — and the win rate that ratio has to beat before the setup makes money.
Risk / reward
3.00 : 1
Breakeven win rate
25.0%
- Direction
- long
- Risk
- 10
- Reward
- 30
The breakeven rate is a floor: spread, commission and swap all raise the win rate actually required.
The ratio is only half the answer
“3:1” sounds good and “1:1” sounds poor, but neither statement means anything on its own. What decides whether a setup is worth taking is the win rate the ratio requires:
risk = |entry − stop| reward = |target − entry| ratio = reward ÷ risk breakeven win rate = risk ÷ (risk + reward)
A 3:1 setup breaks even at a 25% win rate. A 1:1 setup needs 50%. A 0.5:1 setup needs 67%. None of those is good or bad until you compare it with how often that setup actually wins in your own history.
A worked example
Long gold at 2000, stop at 1990, target at 2030:
risk = |2000 − 1990| = 10 reward = |2030 − 2000| = 30 ratio = 30 ÷ 10 = 3.00 : 1 breakeven = 10 ÷ (10 + 30) = 25%
So this setup needs to work slightly more than one time in four. If your record shows it works one time in five, the ratio is attractive and the setup still loses money.
Why the breakeven figure is a floor
The calculation uses the prices you enter and nothing else. Every real cost — spread, commission, swap, and slippage on the stop — pushes the required win rate above the number shown. On a tight intraday setup those costs are a meaningful share of the reward, so treat the result as the best case rather than the expected one.
The calculator also refuses a target on the wrong side of the entry. A “long” with a target below entry is a typo rather than a trade, and returning a confident negative ratio for it would look like an answer.
Planned versus realised
This is the ratio you planned. The one that matters is the ratio you realised — after partial exits, moved stops and targets taken early. Those two numbers are often very different, and the gap between them is usually more informative than either figure alone.
Frequently asked questions
- How is the risk/reward ratio calculated?
- Reward divided by risk, both measured as price distances from your entry. Risk is the distance from entry to stop, reward is the distance from entry to target. An entry at 100 with a stop at 98 and a target at 106 is 6 ÷ 2 = 3, written 3:1.
- What win rate does a given risk/reward ratio need?
- The breakeven win rate is risk ÷ (risk + reward), or 1 ÷ (1 + R). A 1:1 setup needs to win more than 50% of the time, 2:1 needs more than 33.3%, and 3:1 needs more than 25%. Below that threshold the setup loses money however good the ratio looks.
- Is a higher risk/reward ratio always better?
- Not on its own. A ratio only tells you what win rate the setup must beat; it says nothing about whether your setup actually achieves it. A 5:1 target that fills 10% of the time loses money, while a 1:1 that fills 60% of the time makes it. The ratio and the hit rate have to be read together.
- Does the breakeven win rate include costs?
- No, and that makes it a floor rather than a target. Spread, commission and swap all raise the real breakeven, so a setup that needs 33.3% on paper needs somewhat more in practice.
- Why does the calculator reject my target?
- The target has to sit on the opposite side of your entry from the stop. A long with a target below entry, or a short with a target above it, is a typo rather than a trade — computing a ratio from it would return a confident negative number that looks like an answer.