Enter the expected monetary return and the maximum possible loss into the calculator to determine the reward to risk ratio.

## Reward to Risk Ratio Formula

The following formula is used to calculate a reward to risk ratio.

RRR = ER / ML

- Where RRR is the reward to risk ratio
- ER is the expected return or reward ($)
- ML is the maximum potential loss ($)

## Reward to Risk Ratio Definition

A reward to risk ratio is a measure of the ratio of a possible monetary reward to the potential monetary loss of a given investment. In other words, the ratio of potential upside to potential downside.

## Reward to Risk Ratio Example

How to calculate reward to risk ratio?

**First, determine the potential or expected return.**This can either be the maximum expected monetary gain, or the most likely expected return.

**Next, determine the potential maximum loss.**For example, if you had a 50$ investment, the maximum loss is likely 50$.

**Finally, calculate the reward to risk ratio.**Calculate the RRR using the equation above.

## FAQ

**What is a good reward to risk ratio for an investment?**

This answer depends entirely on your risk tolerance, but a 2:1 reward to risk ratio is often considered the minimum ratio for considering long term investments.