🎲 Risk Reward Ratio Calculator
Compute your trade's risk-to-reward profile and discover the exact win rate required to sustain long-term trading profitability.
Risk / Reward Metrics
Why Expectancy Trumps Win Rate
Trading expectancy combines your win rate with your average reward-to-risk ratio. With a 1:3 ratio, even if 6 out of 10 trades lose, your four winning trades (+12R) easily overwhelm the six losing trades (-6R), netting a clean +6R profit. Never take low reward setups where risk exceeds profit potential.
Frequently asked questions
What is a good risk-to-reward ratio for stocks?
Most professional swing and trend traders look for setups with a minimum 1:2 or 1:3 risk-to-reward ratio, allowing them to remain comfortably profitable even with a 40% win rate.
How is the break-even win rate calculated?
Break-even win rate equals 1 / (1 + Reward:Risk). For example, with a 1:2 ratio, break-even is 1 / (1 + 2) = 33.33%, meaning you need to win only 1 in 3 trades to avoid losing money.
Can you use this calculator for short trades?
Yes. If your target price is lower than your entry price and your stop loss is higher, the calculator automatically computes short-selling risk-to-reward dynamics.
Why is a high win rate alone not sufficient?
A trader with an 80% win rate can easily go broke if their average loss is five times larger than their average win. Risk-reward management ensures positive mathematical expectancy.