Risk Reward Calculator

How the ratio is worked out

The ratio is two distances divided by each other. Nothing else goes into it — not your account, not your size, not how confident you feel.

Take a long on EUR/USD at 1.1000 with a stop at 1.0950 and a target at 1.1100. Risk is 0.0050, reward is 0.0100, and 0.0100 / 0.0050 = 2. The trade is 1:2, and it needs you to win one time in three to break even: 1 / (1 + 2) = 0.333.

That second line is the one traders skip. A ratio is not a quality score — it is a demand. 1:3 sounds better than 1:2 and it is, if you can still hit the target; but it is only worth more if the extra distance does not push your hit rate below 25%. Ratios are cheap to want and expensive to collect.

The number that decides whether the ratio is enough

Every ratio has a win rate attached to it, and the trade is only profitable if your real hit rate clears it. There is no judgement in this — it is one division.

The last column is where people misread the table. At five winners out of ten, 1:1 is flat before costs and loses once the spread and commission are counted, while 1:5 makes twenty times your risk — but you only get 1:5 if the market walks five times your stop distance in your direction, regularly. The honest way to use this table is backwards: start from the hit rate your method actually produces, then read across to the minimum ratio that clears it.

What a losing streak does while you wait for that win rate

Here is the part that sits between the ratio and your account. Your break-even win rate is an average over many trades; a losing streak is what happens on the way there. Risking 1% of the account per trade, this is what the equity curve looks like if every trade loses:

Read this next to the win rate table. A method that needs 33.3% winners will lose two out of three trades on average, which means runs of five, six, seven losers are ordinary — and after seven you are at 93.21%, not ruined. That is the whole argument for fixing risk per trade before you argue about ratios: at 1%, twenty straight losers cost 18.21% of the account. At 2% the same run costs 33.24%.

So the ratio tells you what hit rate you need, and the risk percentage decides whether you survive long enough to collect the average. They are two separate dials and people constantly turn one while blaming the other.

Same stop, three targets

Your stop should be placed where the trade idea is wrong, and that location does not move because you want a better ratio. The target is the flexible end. On the 50-pip stop from the example above:

Moving the target from 1.1050 to 1.1100 halves the win rate you need, and costs you nothing on the losing trades — the stop has not moved. That is why the ratio is worth calculating before the entry rather than after: if the distance the market realistically travels will not reach your break-even win rate, the trade is not a trade, no matter how good the setup looks.

Finding the target from the ratio you want

Sometimes you know the ratio the method needs and want the price instead:

Entry 1.1000, stop 1.0950, and a method that needs 1:2.5: the stop distance is 50 pips, so the target sits at 1.1000 + 2.5 x 50 pips = 1.1125. The calculator above does this in the reverse-lookup box — type the R you want and it gives you the price.

One caution on doing it this way round: the price you get is arithmetically correct and may be somewhere the market has no reason to go. Check it against the chart after you compute it, not before.

What people call this

The same calculation goes by risk reward ratio calculator, reward-to-risk, R multiple, or just "my R". They are all the division on this page. Two conventions worth knowing so you are not confused by someone else's numbers:

• Written order. Most people write risk first: 1:2 means risk one to make two. Some broker platforms print it the other way round. Check which end is which before you compare.
• Planned versus realised. Planned R is what you computed before the entry. Realised R is where you actually got out. A journal that only records planned R will always look better than your account.

Costs belong in the planned figure. A 1:2 on raw prices with a 1-pip spread and 7 USD of commission per standard lot is not 1:2 in money — the calculator above shows both, and the gap is why "almost 2R" trades are really 1.9R trades.

Questions traders ask

It is good if your hit rate clears 33.3%, which is the win rate 1:2 demands. A 1:2 method that wins 25% of the time loses money, and a 1:1 method that wins 60% does not. The ratio is not a grade; it is the entry ticket to a win rate you have to actually produce.

No. Tightening the stop to lift the ratio changes the trade, not the arithmetic: a stop placed inside the noise will be hit before the idea is disproven, and the higher ratio on a trade that never gets to run is worth nothing. Place the stop where the idea is wrong, then set the target from the distance the market actually travels.

Because 1:3 needs one winner in four, and if your real hit rate is 20% you are below it. At ten trades with two winners you make 6R and lose 8R. Before changing the ratio, measure the hit rate over your last fifty closed trades — that number decides which ratio you can afford to run.

Where this page stops and position sizing starts

This page gives you a ratio and a win rate. It does not tell you how many units to buy — that depends on your account, your risk percentage and your stop distance in money, which is the position size calculator. Do the ratio first to see whether the trade is worth taking, then size it to see how much of it you can afford.

If you know your risk budget and want the other direction — how far the stop may sit for a given size — the forex position size page covers the risk-to-lots arithmetic, and the risk-per-trade page covers choosing the percentage itself.

Size the trade with the position size calculator

Related guides

• How much should you risk per trade? — losing streaks and drawdown recovery, pure arithmetic.
• Kelly criterion calculator — what win rate and payoff imply about size.
• Forex position size calculator — from risk and stop distance to lots.
• Forex, stock and crypto position size calculator