Risk/Reward Ratio Calculator

The risk/reward ratio compares what you stand to gain against what you stand to lose on a single trade: R:R = reward ÷ risk. Risk is the distance from your entry to your stop loss; reward is the distance from your entry to your target. A trade that risks 10 points to make 30 points is 3:1 (often written 1:3, reward-to-risk).

Measuring it in R-multiples — where 1R is the amount you risk — keeps the math clean. A 3:1 winner is +3R; a full loss is −1R. Because R normalizes for position size and dollar amount, you can compare a tiny scalp and a large swing trade on the same scale, and the calculator’s output applies no matter how big the account.

Your R:R sets the win rate you need just to break even: Breakeven win rate = 1 ÷ (1 + R:R). The higher your reward relative to your risk, the lower the win rate you can survive on.

The numbers are striking. At 1:1, you need to win 50% of trades to break even. At 2:1, only 33%. At 3:1, just 25%. At 4:1, a mere 20%. This is the single most important idea in the whole topic: a strong risk/reward ratio lets you be profitable while losing the majority of your trades — because your few winners each pay for several losers. Win above the breakeven rate and you have a positive expectancy; win below it and even a high hit rate loses money.

You buy at 100.00, place your stop at 99.00 (risk = 1.00) and your target at 103.00 (reward = 3.00). Your R:R is 3:1. The breakeven win rate is 1 ÷ (1 + 3) = 0.25 = 25%.

Now test it over 10 trades where you win only 4 (a 40% win rate). Winners: 4 × +3R = +12R. Losers: 6 × −1R = −6R. Net = +6R, or +0.6R of expectancy per trade — clearly profitable despite losing 60% of the time. Run the same 40% win rate at a 1:1 ratio and you’d net 4 × +1R − 6 × −1R = −2R: a loser. Same hit rate, opposite outcome — the ratio is what flipped it.

Type your entry, stop, and target and the calculator returns the R:R and the breakeven win rate. Use it as a filter: many traders set a minimum, e.g. "no trade below 2:1," and skip setups that don’t clear it. That single rule forces you toward asymmetric trades where the math is on your side.

The honest trap: a great ratio is worthless if the target is unrealistic. It’s easy to manufacture a 5:1 ratio by parking your target at a price that almost never gets hit, which quietly collapses your real win rate below breakeven. The ratio and the win rate are two halves of the same equation — improving one by sabotaging the other gains nothing. Base targets on real structure (prior highs/lows, measured moves), not on the number you wish to see. This is educational, not financial advice.

The calculator shows the breakeven win rate a setup *needs*. The only way to know your real win rate and average R-multiple is to log every trade and review them — planned R:R rarely equals realized R:R once slippage, early exits, and stop adjustments are counted.

TradeZella automates exactly this: it imports your trades and reports your true win rate, average win versus average loss, and expectancy by setup, so you can see whether your live 2:1 trades actually pay 2:1. Pairing this calculator (to plan the ratio) with a journal (to measure what you really achieve) is how traders close the gap between the theory and the P&L.