Answer first
What this calculator tells you
Calculate the reward-to-risk ratio and the win rate needed to break even on a trade. Check that a target pays enough for the risk of the stop before you place the order. Formula: Risk = entry − stop; reward = target − entry; ratio = reward ÷ risk; break-even win rate = 1 ÷ (1 + ratio). At the worked-example inputs, the reward-to-risk ratio is 3.00×. Holding every other input steady, moving entry price from $40 to $60 moves the result from -5.00× to 3.00×.
Transparent method
The formula
Check that a target pays enough for the risk of the stop before you place the order.
Worked example
Example inputs
How to interpret the result
Reward-to-risk compares what a trade could gain with what it could lose. Entering at $50 with a $47.50 stop and a $57.50 target risks $2.50 to make $7.50, a ratio of 3 to 1. That ratio sets how often you need to win: at 3 to 1, a win rate of 25 percent breaks even before costs. The higher the ratio, the less often you have to be right.
At the worked-example inputs the reward-to-risk ratio is 3.00×. It rises with entry price and profit target and falls as stop-loss price increases.
Investment returns are uncertain; taxes, fees, volatility and cash-flow timing can materially change results.
Before you rely on it
What to check
Set the target from where the price could plausibly go, not from the ratio you want. A target far beyond any reasonable move makes the ratio look good and the plan poor.
The common error
Where people go wrong with risk reward ratio calculator
Chasing a high ratio while ignoring the chance of reaching the target. A 5 to 1 trade that almost never gets there loses money over time.
Sensitivity evidence
How entry price changes the reward-to-risk ratio
Holding every other input at the worked-example value, moving entry price from $40 to $60 moves the reward-to-risk ratio from -5.00× to 3.00×: a spread of 8.00×, or 267% of the worked-example result.
| Entry price | Reward-to-risk ratio | Break-even win rate | Risk per share |
|---|---|---|---|
| $40 | -2.33× | 0.000% | -$7.50 |
| $45 | -5.00× | 0.000% | -$2.50 |
| $50worked example | 3.00× | 25.0% | $2.50 |
| $55 | 0.33× | 75.0% | $7.50 |
| $60 | -0.20× | 0.000% | $13 |
Every input, tested
Which input moves the reward-to-risk ratio most
Of the 3 inputs, stop-loss price moves the reward-to-risk ratio most (4.82× across the range tested) and profit target moves it least (4.40×).
| Input | Tested from | To | Reward-to-risk ratio at each end | Swing |
|---|---|---|---|---|
| Stop-loss price | $43 | $52 | 1.07× to -3.75× | 4.82× (161%) |
| Entry price | $45 | $55 | -5.00× to 0.33× | 5.33× (178%) |
| Profit target | $52 | $63 | 0.80× to 5.20× | 4.40× (147%) |
Two variables at once
Reward-to-risk ratio by entry price and stop-loss price
Across the grid the reward-to-risk ratio runs from -4.17× to 8.75×. Moving entry price from $40 to $60 shifts it by 1.98× at the middle column, and moving stop-loss price from $38 to $57 shifts it by 1.70× at the middle row, so entry price is the bigger lever here.
| Entry price \ Stop-loss price | $38 | $48 | $57 |
|---|---|---|---|
| $40 | 8.75× | -2.19× | -1.03× |
| $45 | 1.79× | -4.17× | -1.04× |
| $50 | 0.63× | 3.75× | -1.07× |
| $55 | 0.15× | 0.36× | -1.25× |
| $60 | -0.11× | -0.21× | -0.83× |
The highlighted cell is the worked example.
Step by step
The worked example, input by input
| Input | Value used | What it means |
|---|---|---|
| Entry price | $50 | Enter the entry price used in this calculation. |
| Stop-loss price | $48 | Enter the stop-loss price used in this calculation. |
| Profit target | $58 | Enter the profit target used in this calculation. |
| Reward-to-risk ratio | 3.00× | |
| Break-even win rate | 25.0% | |
| Risk per share | $2.50 | |
Inputs, definitions and assumptions
Entry price
Enter the entry price used in this calculation. The prefilled worked-example value is $50.
Stop-loss price
Enter the stop-loss price used in this calculation. The prefilled worked-example value is $48.
Profit target
Enter the profit target used in this calculation. The prefilled worked-example value is $58.
How to use this calculator
- 1Verify the inputs. Gather entry price, stop-loss price and profit target from your own documents; the prefilled values are examples.
- 2Save a baseline. The worked example puts the reward-to-risk ratio at 3.00×. Store your own version of it as Scenario A.
- 3Test one change. Start with stop-loss price, the input with the biggest effect here: moving stop-loss price from $43 to $52 takes the reward-to-risk ratio from 1.07× to -3.75×, a swing of 161% of the worked-example figure.
- 4Check the boundary. Read the interpretation boundary above before acting on the result.
People also ask
Frequently asked questions
How do you calculate risk reward ratio?
Risk = entry − stop; reward = target − entry; ratio = reward ÷ risk; break-even win rate = 1 ÷ (1 + ratio). Enter entry price in dollars, stop-loss price in dollars and profit target in dollars. At the worked-example inputs the reward-to-risk ratio is 3.00×.
What does the risk reward ratio result mean?
Check that a target pays enough for the risk of the stop before you place the order. At the worked-example inputs the reward-to-risk ratio is 3.00×. It rises with entry price and profit target and falls as stop-loss price increases.
How much does entry price change the reward-to-risk ratio?
Holding every other input at the worked-example value, moving entry price from $40 to $60 moves the reward-to-risk ratio from -5.00× to 3.00×, a spread of 8.00×.
What are the limits of this risk reward ratio calculator?
Investment returns are uncertain; taxes, fees, volatility and cash-flow timing can materially change results. The tables on this page test entry price only from $40 to $60; a value outside that range is not tabulated here.
Which input moves the reward-to-risk ratio most in the risk reward ratio calculator?
Ranked by how far each moves the reward-to-risk ratio across the range tested: stop-loss price (4.82×, 161%), entry price (5.33×, 178%) and profit target (4.40×, 147%).
How much does stop-loss price matter in the risk reward ratio calculator?
The worked example uses $48. Holding every other input at its worked-example value, moving stop-loss price from $43 to $52 takes the reward-to-risk ratio from 1.07× to -3.75×, a swing of 161% of the worked-example figure.
How much does profit target matter in the risk reward ratio calculator?
The worked example uses $58. With the other inputs left at the worked example, moving profit target from $52 to $63 takes the reward-to-risk ratio from 0.80× to 5.20×, a swing of 147% of the worked-example figure.
Which inputs change the break-even win rate in the risk reward ratio calculator?
At the worked-example inputs it is 25.0%. Entry price takes it from 0.000% to 75.0%, stop-loss price takes it from 48.3% to 0.000% and profit target takes it from 55.6% to 16.1%.
Which inputs change the risk per share in the risk reward ratio calculator?
At the worked-example inputs it is $2.50. Entry price takes it from -$2.50 to $7.50 and stop-loss price takes it from $7.00 to -$2.00.
Sources and evidence
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