Risk-Reward Calculator

Risk-reward ratio compares what you stand to lose against what you could gain on any trade. A 1:2 ratio means risking $50 to potentially make $100. This single number determines whether your trading strategy can survive long-term.

Here's the math that matters: with a 1:2 risk-reward, you only need to win 34% of trades to break even. Win 40% and you're profitable. Win 50% and you're building wealth. Compare that to 1:1 risk-reward traders who need 50%+ win rates just to cover spreads and commissions.

The Formula

Risk-Reward Ratio = (Take Profit - Entry) ÷ (Entry - Stop Loss)

For a buy trade at 1.1000 with stop at 1.0950 (50 pip risk) and target at 1.1150 (150 pip reward):

150 ÷ 50 = 1:3 risk-reward

This setup only needs a 25% win rate to break even. That's why professionals obsess over risk-reward before considering entry signals.

How to Use This Calculator

1. Enter your entry price — Where you plan to open the trade.
2. Set your stop loss — The level where you'll exit if wrong. Base this on market structure, not arbitrary numbers.
3. Set your take profit — The level where you'll exit with profit. Again, use support/resistance, not wishful thinking.
4. Read the ratio and break-even win rate — If break-even exceeds your historical win rate, skip the trade.

The calculator also shows your break-even win rate: the minimum percentage of winning trades needed to avoid losing money over time.