Risk/Reward Calculator

What is a Risk/Reward Calculator?

A risk/reward calculator computes the ratio between the amount you stand to lose if your stop loss is hit and the amount you stand to gain if your take profit is reached. Enter your entry price, stop loss, and target; the calculator outputs your R:R ratio and the minimum win rate required for your strategy to be profitable — the two numbers that determine whether any trade setup has positive expectancy before you execute.

Risk/reward ratio is the foundational metric of systematic trading. A 1:2 R:R means you risk $1 to make $2. At that ratio, you only need to win 34% of your trades to break even. Understanding how R:R interacts with your actual win rate — not the win rate you hope to achieve — is what separates traders who compound their accounts from traders who slowly bleed them out.

The Math Behind Profitable Trading

The secret to profitable trading isn't having a 90% win rate. It's having positive expectancy. Positive expectancy is created when your Risk/Reward (R:R) ratio perfectly balances out your win rate.

The Risk/Reward ratio simply compares how much money you stand to lose if your Stop Loss is hit, versus how much money you stand to make if your Take Profit is hit. A 1:2 R:R means you risk $100 to make $200.

How the Breakeven Win Rate Works

When your Risk/Reward ratio changes, the mathematical win rate required just to avoid losing money changes drastically:

• 1:1 Ratio: You must win 50% of your trades to break even.
• 1:2 Ratio: You must win 33% of your trades to break even.
• 1:3 Ratio: You must win 25% of your trades to break even.
• 1:5 Ratio: You must win 17% of your trades to break even.

This means if you structure your trades to always target a 1:3 ratio, you can literally be wrong 7 out of 10 times and still be profitable.

Why Retail Traders Fail

Retail traders often boast about a 90% win rate. The problem? They are scalping 2 points of profit but holding losing trades for 20 points before cutting the cord.

If your average win is $20 and your average loss is $200, your Risk/Reward ratio is 1:0.1. At that ratio, you need a 91% win rate literally just to break even. The moment market volatility shakes you out, that math guarantees your account will be blown.

Who Is This For?

• Day traders and swing traders evaluating setups pre-entry who need to confirm that a potential trade has an R:R ratio consistent with their system's historical win rate before committing capital.
• Traders backtesting strategies who want to calculate the breakeven win rate for a given R:R target and compare it against their actual backtested results to determine if the edge is real.
• Prop firm traders managing evaluation accounts who need to verify that every trade they take meets a minimum R:R threshold — since one oversized loss on a tight drawdown limit can end an evaluation that took weeks to build.

Key Benefits

• Instant expectancy math: Calculates not just the R:R ratio but the exact breakeven win rate — the number your strategy actually needs to beat to be profitable over time.
• Free, no account required: Evaluate unlimited trade setups at no cost without signing up for anything.
• 100% private: Your entry levels, stop prices, and targets are calculated entirely in your browser — nothing is transmitted to any server.
• Works for any asset: Stocks, futures, crypto, forex — the math is identical across all instruments since it operates purely on price distances.

Common Use Cases

Evaluating a setup before entry: A trader identifies a stock breaking a resistance level at $50. They plan a stop at $48 (2 points of risk) and a target at $56 (6 points of reward). The calculator confirms a 1:3 R:R ratio — requiring only a 25% win rate to be profitable. The trader knows their system historically wins 40% on breakout setups, so positive expectancy is confirmed before the order is placed.

Diagnosing why a strategy is losing money: A trader has a 65% win rate but is losing money. They run their last 20 trades through the calculator and find the average R:R was 1:0.7 — meaning losses were larger than wins. At 1:0.7 R:R, a 65% win rate produces a negative expectancy. Widening targets or tightening stops to reach 1:1.5 R:R would turn the same 65% win rate into a profitable system.

Setting realistic targets on a prop firm evaluation: A trader on a Topstep evaluation needs to maintain a consistent R:R to protect their trailing drawdown. They use this calculator alongside the Prop Firm Evaluation Calculator to ensure every trade's reward target is at least 2× the stop distance — building profit buffer above the drawdown floor with each winning trade rather than grinding it away.

Frequently Asked Questions