Calculate your risk reward ratio from entry, stop loss, and target price. Also finds the target price for any desired ratio and the win rate needed to break even.
Risk Reward Ratio Formula
The risk/reward ratio compares what a trade risks to what it targets, using the distance from entry to stop and from entry to target:
RRR = (T - E) / (E - SL)
To find the target price that delivers a desired ratio, the same relationship is rearranged:
T = E + RRR * (E - SL)
Variables:
- RRR is the reward-to-risk ratio (2 means the target is twice the risked distance, written 1:2)
- E is the entry price ($)
- SL is the stop loss price ($)
- T is the target (take profit) price ($)
For short trades the distances flip: risk is the stop minus the entry and reward is the entry minus the target. Choose what you want to find at the top of the calculator – the ratio from your three prices, or the target price that produces a ratio you specify. Adding an optional share count converts the per-share risk and reward into total dollars, and every result includes the win rate needed to break even at that ratio.
Breakeven Win Rate by Ratio
The ratio you trade at determines the win rate needed just to break even, using W = 1 / (1 + RRR). This table is a quick reference.
| Risk : Reward | Breakeven win rate | Profitable if you win |
|---|---|---|
| 1 : 0.5 | 66.7% | More than 2 of 3 trades |
| 1 : 1 | 50.0% | More than half |
| 1 : 1.5 | 40.0% | More than 2 of 5 |
| 1 : 2 | 33.3% | More than 1 of 3 |
| 1 : 3 | 25.0% | More than 1 of 4 |
| 1 : 5 | 16.7% | More than 1 of 6 |
Higher ratios buy you room to be wrong more often, but targets that far from entry are reached less frequently – the two always trade off.
Example Problems
Example 1: Find the ratio.
You buy at $50.00, set a stop at $48.00, and target $56.00.
Risk = 50 – 48 = $2.00 per share. Reward = 56 – 50 = $6.00 per share. RRR = 6 / 2 = 3, a 1:3 trade. Breakeven win rate = 1 / (1 + 3) = 25%.
Example 2: Find the target for a 1:2 trade.
You short at $80.00 with a stop at $82.50 and want a 1:2 ratio.
Risk = 82.50 – 80.00 = $2.50. Required reward = 2 * 2.50 = $5.00, so the target is 80.00 – 5.00 = $75.00.
Frequently Asked Questions
What is a good risk reward ratio?
Many traders look for at least 1:2, meaning the target is twice the distance of the stop. At 1:2 you stay profitable winning just over a third of the time. The right number depends on your strategy’s win rate – scalping systems tolerate lower ratios because they win more often.
Does a higher ratio guarantee better results?
No. Stretching a target to force a 1:5 ratio does nothing if price rarely reaches it. Expectancy – win rate multiplied by reward minus loss rate multiplied by risk – is what matters, and it depends on both numbers together.
Where should the stop loss go?
Place the stop where the trade idea is invalidated – beyond support, resistance, or a volatility band such as an ATR multiple – and only then size the position. Setting stops purely to hit a ratio puts them at arbitrary prices the market does not respect.
