Risk Reward Ratio Calculator
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Frequently Asked Questions
How do you calculate risk to reward ratio?
Risk to reward ratio equals the distance from entry to stop loss divided into the distance from entry to profit target. If you buy a stock at $100 with a stop at $95 and a target of $115, your risk is $5 and your reward is $15, giving a 1:3 risk to reward ratio. You risk $1 to make $3 on the trade.
What is a good risk to reward ratio for trading?
Most professional traders target at least 1:2 or 1:3 risk to reward. With a 1:2 ratio, you only need to win 34% of your trades to break even. At 1:3, you only need to win 25%. Higher ratios give you more room for error on win rate but are harder to find in high-probability setups.
How does position size relate to risk reward?
Position size is derived from your risk per trade divided by your stop distance. If you risk 1% of a $100,000 account ($1,000) on a trade with a $2 stop, your position size is 500 shares. Risk reward ratio determines how much you can make on that 500-share position, but it does not change the position size itself.
What does a 1:3 risk reward ratio mean?
A 1:3 risk to reward ratio means you are risking 1 unit to make 3 units. If your stop loss is $2 below entry, your profit target is $6 above entry. Over a large sample size, a trader with a 1:3 ratio only needs to win 25% of the time to break even and anything above that is profit.
How do I use risk reward to set stop loss and profit target?
Start by identifying a logical stop based on the chart (below support, above a swing high, below a moving average). Then multiply the stop distance by your minimum R multiple (typically 2 or 3) to find your profit target. If the resulting target is not reachable based on price structure, skip the trade. Let the chart define the stop, then size the target from the ratio.
How to Use This Risk Reward Ratio Calculator
This free risk reward ratio calculator helps traders evaluate the potential return of a trade compared to its risk. To get started, enter your entry price, profit target, and stop loss level. The calculator will instantly display your risk-to-reward ratio and the minimum win rate needed to break even.
In the example shown above, entering an entry price of $10, a profit target of $15, and a stop loss at $9 gives a risk-to-reward ratio of 5.00. That means you’re risking $1 to potentially make $5. To break even on trades with this ratio, you only need to win 16.67% of the time.
Below the results, you’ll see a helpful visual chart. The red Breakeven Line shows the win rate needed for different reward-to-risk ratios. The green dot marks Your Position, helping you quickly understand whether your strategy is statistically favorable over time.
This calculator is ideal for day traders, swing traders, or anyone who wants to assess trade setups with a risk-first mindset.
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