Risk/Reward Ratio Calculator

Category: Trading Calculators
- August 31, 2026
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Calculate and optimize your risk-to-reward ratios to improve your trading strategy's profitability

Trade Setup

For a long position, set below entry price. For a short position, set above entry price.
For a long position, set above entry price. For a short position, set below entry price.
$
Position Type:

Risk Parameters

%
Maximum percentage of account to risk on this trade
%
Estimated probability of winning this trade
Calculation Mode:

Results

Risk/Reward Ratio 1:2.00
Risk Reward
Risk Amount $50.00 5 pips
Reward Amount $100.00 10 pips
Account Risk 0.5% of total account
Expected Value $25.00 Based on win probability
Break-Even Win Rate 33.3% Minimum required win rate

Risk/Reward Visualization

Profit Scenario Analysis

Optimal Position Sizing

Recommended Position Size

0.8 Lots

Based on your risk tolerance of 2% of account balance

Based on Fixed Risk % 0.8 Lots
Based on Fixed $ Amount 1.0 Lots
Based on R-Multiple 1.5 Lots
Kelly Criterion 0.7 Lots

Trade Analytics

R-Multiple 2.0R Reward as multiple of risk
Profit Factor 2.0 Reward:Risk ratio weighted by probability
Expected Gain 0.25% Expected account growth per trade
Win/Loss Expectancy 1.25 Expected profit per $1 risked

About Risk/Reward Ratios

The risk/reward ratio is a fundamental concept in trading that compares the potential loss (risk) to the potential gain (reward) of a trade. It helps traders evaluate whether a trade is worth taking and is a key component of risk management.

Interpreting the Ratio

A risk/reward ratio of 1:2 means you're risking $1 to potentially gain $2. Lower ratios (like 1:3 or 1:5) are generally more favorable as they indicate a greater potential reward relative to the risk.

Position Sizing

Proper position sizing ensures you're risking an appropriate amount of your trading capital. The recommended approach is to risk a small percentage (1-2%) of your account on any single trade.

Break-Even Win Rate

This is the minimum winning percentage needed to break even over time. With a 1:2 risk/reward ratio, you only need to be right on 33.3% of your trades to break even.

Expectancy

Expectancy combines win rate with risk/reward to determine the expected return per dollar risked. Positive expectancy is essential for long-term profitability.

Tips for Using Risk/Reward Effectively

  • Aim for a risk/reward ratio of at least 1:2 to maintain profitability even with a win rate below 50%.
  • Always define your stop loss and take profit levels before entering a trade.
  • Consider adjusting your position size to keep risk consistent across different trades.
  • Track your actual results to determine your empirical win rate and adjust your strategy accordingly.
  • Remember that a favorable risk/reward ratio doesn't guarantee success; market analysis is still crucial.

What this calculates

How much you stand to gain against what you are risking.

Formula
risk/reward = (target − entry) ÷ (entry − stop)
Worked example
Entry 1.0850, stop 1.0800, target 1.0975. Risk is 50 pips, reward 125 pips, so the ratio is 2.5:1.
When to use it
Before entry, to decide whether the trade is worth taking at all.
Common mistake
A good ratio does not make a trade good. A 5:1 setup that only wins 10% of the time still loses money over a run.