Risk/reward calculator
Enter your entry, your stop loss and your target, and I will tell you how much you risk for each unit you aim to make and what share of your trades you need to win to break even. It is the calculation from the guide on stop loss and take profit.
Risk/reward1:3
Win rate to break even25%
To the stop-2%
To the target+6%
You risk 1 to make 3: if you win more than 25% of trades like this one, you make more than you lose, before fees.
Without fees or slippage, which lower what you make a little and raise what you lose a little.
What win rate you need
The more you make on each win compared with what you lose on each loss, the less often you need to be right. The last column is the result of ten trades, four good and six bad, risking 1% of the account on each one:
| Ratio | Win rate to break even | Your account after 4 wins and 6 losses (1% per trade) |
|---|---|---|
| 1:0.5 | 66.67% | -4% |
| 1:1 | 50% | -2% |
| 1:1.5 | 40% | 0% |
| 1:2 | 33.33% | +2% |
| 1:3 | 25% | +6% |
| 1:4 | 20% | +10% |
| 1:5 | 16.67% | +14% |
At 1:1 you need to win half the time just to break even; at 1:3, one time in four.
The formula I use
- Distance to the stop = (entry − stop) ÷ entry, without the sign. Entry at 60,000 and stop at 58,800: 2%.
- Distance to the target = (target − entry) ÷ entry, without the sign. Target at 63,600: 6%.
- Ratio = distance to the target ÷ distance to the stop. 6 ÷ 2 = 3: 1:3.
- Win rate to break even = 1 ÷ (1 + ratio). 1 ÷ 4 = 25%.
The ratio doesn’t depend on size or leverage: it is the same with 100 USDT as with 10,000. How much to open so the stop costs you what you want to risk is what the position size calculator gives you.
Stop and target first, ratio second
The stop goes where the chart shows you were wrong, and the target, where you expect the price to get to: a previous high or low, a zone where it has already turned. The ratio comes from there.
Moving the target further away so the ratio looks better doesn’t change what the price will do: if it gets there less often, you need to be right more often. How to choose both is in stop loss and take profit.
Frequently asked questions
How do you calculate the risk/reward ratio?
Divide the distance to your target by the distance to your stop. With the entry at 60,000, the stop at 58,800 and the target at 63,600, you risk 2% to make 6%: 1:3.
What win rate do I need at 1:2?
More than 33.33% not to lose money, before fees: 1 ÷ (1 + 2). At 1:3, more than 25%, and at 1:1, more than 50%.
What is a good risk/reward ratio?
It depends on how often you win. A 1:1 with a 60% win rate makes money, and a 1:4 with 15% loses it. The ratio only tells you something alongside your win rate.
Does it work for a short?
Yes. Put the stop above the entry and the target below it: the calculator sees that it is a short and does the same calculation.
Does it include fees?
No. Opening and closing fees lower what you make on each win and raise what you lose on each loss, so in practice you need to win a little more often than the table says.