About the Risk/Reward Calculator
The risk/reward ratio describes the relationship between a trade's potential loss and potential gain. A ratio of 1:3 means the potential reward is three times the amount at risk. Traders use it to compare setups consistently.
This calculator is informational only. It does not evaluate whether a trade is advisable, and the ratio says nothing on its own about how likely either price is to be reached.
How It Works
Risk per share is the distance from your entry price to your stop-loss. Potential reward per share is the distance from your entry price to your take-profit. The ratio divides reward by risk and is shown as 1:x.
For a long trade, the stop-loss sits below entry and the take-profit above it. For a short trade, the stop-loss sits above entry and the take-profit below it. The break-even win rate shows how often trades with this ratio would need to reach the target, ignoring costs, for gains and losses to offset.
Formula
Example
A long trade enters at $100 with a stop-loss at $95 and a take-profit at $115.
Inputs
- Entry
- $100.00
- Stop-loss
- $95.00
- Take-profit
- $115.00
Results
- Risk
- $5.00 (5.00%)
- Reward
- $15.00 (15.00%)
- Risk/reward
- 1:3
- Break-even win rate
- 25.00%
Understanding Your Results
- Risk/Reward Ratio: Potential reward for each $1 of risk. 1:2 means $2 of potential reward per $1 at risk.
- Risk Per Share: The loss per share if the stop-loss is reached, before costs.
- Potential Reward: The gain per share if the take-profit is reached, before costs.
- Break-even Win Rate: The share of trades that would need to hit the target (with all others hitting the stop) to break even, ignoring commissions and slippage.