Risk-Reward Calculator
Determine your risk-reward ratio and the minimum win rate needed for profitability.
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Quick answer
Risk-reward ratio = potential profit ÷ potential loss. At 1:2 you only need to win about 34% of trades to break even, because the break-even win rate = 1 ÷ (1 + R:R). A higher ratio lowers the win rate you need to stay profitable.
What is the 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
How to Use This Calculator
- Enter your entry price — Where you plan to open the trade.
- Set your stop loss — The level where you'll exit if wrong. Base this on market structure, not arbitrary numbers.
- Set your take profit — The level where you'll exit with profit. Again, use support/resistance, not wishful thinking.
- 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.
Real-World Example
Example: Good Setup vs Bad Setup
Good Setup (1:2.5):
- Entry: 1.2000
- Stop Loss: 1.1960 (40 pips risk)
- Take Profit: 1.1100 (100 pips reward)
- Ratio: 100 ÷ 40 = 1:2.5
- Break-even win rate: 29%
You could lose 7 out of 10 trades and still make money. That's a trade worth taking.
Bad Setup (1:0.8):
- Entry: 1.2000
- Stop Loss: 1.1950 (50 pips risk)
- Take Profit: 1.2040 (40 pips reward)
- Ratio: 40 ÷ 50 = 1:0.8
- Break-even win rate: 56%
You need to win more than half your trades just to break even. After spreads, you'd need 60%+. Most traders can't sustain that.
When to Use
When to Calculate Risk-Reward
Before every single trade. No exceptions. Here's why:
- Filters bad setups — A beautiful chart pattern with 1:0.5 risk-reward is still a bad trade.
- Removes emotion — Numbers don't lie. Either the math works or it doesn't.
- Enables scaling — Once you know your average risk-reward and win rate, you can predict profitability.
- Justifies patience — Waiting for 1:3 setups means taking fewer but higher-quality trades.
Common Mistakes
Mistakes That Kill Profitability
- Forcing ratios — Setting take profit at 1:3 when the next resistance is at 1:1.5. Market structure determines realistic targets, not your desire for better ratios.
- Widening stops to improve ratio — Moving stop from 30 pips to 50 pips to make the ratio look better. This increases actual risk without increasing edge.
- Ignoring win rate compatibility — A 1:5 ratio means nothing if your strategy only wins 15% of trades. Match your target ratio to your historical win rate.
- Chasing perfect ratios — Waiting for 1:4+ setups that never come while missing solid 1:2 opportunities.
- Not tracking actual results — Your planned ratio and your actual ratio often differ. Track what really happens after 50+ trades.
Use Together With
Position Size Calculator
Calculate the perfect position size for your trades based on your account size, risk tolerance, and stop loss distance.
Profit & Loss Calculator
Calculate your potential profit or loss for any trade before entering the market.
Break-Even Calculator
Calculate the exact price level where your trade covers all costs and breaks even.
Kelly Criterion Calculator
Calculate the mathematically optimal position size based on your win rate and reward-risk ratio.
Frequently Asked Questions
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Position Size
Free forex position size calculator. Enter your account balance, risk percentage, and stop loss to get the exact lot size. Works with all currency pairs, MT4, and MT5.
Profit & Loss
Free forex profit and loss calculator. Enter entry price, exit price, and lot size to see your PnL in both pips and dollars. Supports buy and sell positions.
Break-Even
Free break-even calculator for forex. Calculate the exact price where your trade covers spread and commission costs. Supports buy and sell positions with custom fees.
Kelly Criterion
Free Kelly Criterion calculator for forex. Find the mathematically optimal position size based on your win rate and payoff ratio. Shows full, half, and quarter Kelly.