Risk Reward Calculator
Compare a stop-loss with up to three profit targets and see the required reward in R multiples.
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How this tool works
Compare a stop-loss with up to three profit targets and see the required reward in R multiples. Inputs should represent your own assumptions, current instrument specifications and account denomination; no automatic market-data feed is used unless the page explicitly states otherwise.
Reward-to-risk ratio = potential profit distance ÷ stop-loss distance; break-even win rate (before costs) = 1 ÷ (1 + reward-to-risk).
Worked example
An entry at 100, stop at 95 and target at 110 produces a 2:1 reward-to-risk ratio before costs.
What to check before relying on a result
Check the direction of the trade, units and currency, market contract specifications, realistic spreads and slippage, execution conditions, any applicable taxes and fees, and whether the assumed model fits your instrument. A calculator does not eliminate market risk.
Frequently asked questions
Is a 2:1 reward-to-risk ratio profitable?
Not necessarily. Execution costs, actual win rate and realised exits determine the overall expectancy.
Can I assess short trades?
Yes. Choose Short and enter a stop above the entry and targets below it.
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Explore professional trading courses →What is a risk-to-reward ratio?
The risk-to-reward calculation compares the distance to a profit target with the distance to a stop-loss, for the same trade. A 2:1 reward-to-risk ratio means an intended two units of gross gain for each unit of planned gross loss. It does not establish that the target is likely, that the strategy is profitable, or that the stop will fill at the intended level.
How to use this calculator correctly
- Step 1. Choose Long or Short and supply the intended entry and stop in the correct directional order.
- Step 2. Enter up to three target prices. Targets should be above a long entry and below a short entry.
- Step 3. Provide quantity and monetary value per point to convert price distances into illustrative cash amounts.
- Step 4. Review the break-even win rate and repeat the calculation with plausible execution costs.
Worked comparisons
These are illustrative arithmetic examples, not forecasts or market quotations. They help show how changing one input affects the result.
| Gross reward-to-risk | Break-even wins before costs | Interpretation |
|---|---|---|
| 1:1 | 50.0% | Win rate must exceed half to offset equally sized wins and losses |
| 2:1 | 33.3% | A win rate above one-third is needed before expenses |
| 3:1 | 25.0% | A lower hit rate can be offset by larger realised winners |
How to interpret the results
The break-even formula assumes losses equal one R, wins equal the displayed multiple, and constant trade sizing. If traders take profits early, move stops, suffer slippage or experience variable costs, their realised distribution may differ materially. Compare the risk-to-reward plan with the historical realised expectancy of the strategy—not only its most attractive proposed target.
Common mistakes and limitations
- Check direction: long stop below entry, short stop above entry.
- Use plausible target prices; multiplying a distant target does not increase its likelihood.
- Include commission, spread, finance and slippage when interpreting the required win rate.
Further questions
What does 1R mean?
One R is the monetary loss budgeted between the entry and stop for a particular trade, before unexpected execution differences.
Can I have a good reward-to-risk ratio and lose money?
Yes. A strategy with targets rarely achieved can lose money even when the gross winning trades are large.
Why is break-even win rate different after fees?
Costs make the average net win smaller and the average net loss larger, so a higher success rate may be necessary.
Related Traders MBA learning
Explore the methodology and related calculations in these directly relevant resources:
Figures are illustrative and depend on input assumptions. This material provides general education, not financial advice, trading signals or a forecast. Verify instruments, exchange or broker terms and execution costs before relying on a calculation.