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Risk/Reward Ratio Calculator

By Katie, author of Katie TutorialsKatieTrader and educator · 7+ yearsKatie has traded short-term options for more than seven years and teaches 300,000+ subscribers on YouTube. Every lesson here comes from her own trading journal, mistakes included.Full bioNo signals, no paid mentoring. How the lessons are kept honest · Free tool · Reviewed October 1, 2026

The risk/reward ratio compares how much you could lose on a trade with how much you could make. Enter your entry, stop and target to see the ratio, the money at stake and the win rate you need to break even.

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Risk/reward ratio

1 : 2

Contents (11)
  1. How to use the risk/reward calculator
  2. What is the risk/reward ratio?
  3. The risk/reward formula
  4. Example: a long trade
  5. Example: a short trade
  6. Break-even win rate for common ratios
  7. What is a good risk/reward ratio?
  8. Common mistakes
  9. Frequently asked questions
  10. Related calculators
  11. Learn it properly

How to use the risk/reward calculator

  1. Choose long if you buy, short if you sell.
  2. Enter your entry price, your stop loss and your target.
  3. Optional: add your position size to see the profit and loss in dollars.
  4. Optional: add your real win rate from your journal to see what the average trade makes.

What is the risk/reward ratio?

The risk/reward ratio compares what you stand to lose if the stop is hit with what you stand to make if the target is hit. A ratio of 1 : 2 means you risk 1 to make 2.

On its own the ratio does not tell you whether a trade is good. It tells you how often you need to be right. That is the number to keep in mind.

The risk/reward formula

long: risk = entry − stop, reward = target − entry
short: risk = stop − entry, reward = entry − target
break-even win rate = risk ÷ (risk + reward)

Example: a long trade

You buy at 100 with a stop at 98 and a target at 104. You risk 2 to make 4, a ratio of 1 : 2. You break even if you win one trade in three, 33.3%. With 50 shares, the trade risks 100 dollars to make 200.

Example: a short trade

You sell EUR/USD at 1.0850 with a stop at 1.0880 and a target at 1.0790. You risk 30 pips to make 60, again 1 : 2. For a short trade the stop sits above the entry and the target below it.

Break-even win rate for common ratios

Risk : rewardWin rate to break even
1 : 0.566.7%
1 : 150.0%
1 : 1.540.0%
1 : 233.3%
1 : 325.0%
1 : 516.7%

These numbers are before costs. The spread and commission push each of them a little higher.

What is a good risk/reward ratio?

There is no single right number. What matters is the ratio together with your real win rate. A scalper who wins 60% of trades at 1 : 1 does well. A trend trader who wins 35% at 1 : 3 also does well. A trader who wins 30% at 1 : 2 slowly loses money.

The trading expectancy calculator puts the two together and shows what the average trade makes.

Common mistakes

  • Choosing the target to get a nice ratio. A 1 : 3 on paper means nothing if the market rarely reaches that target.
  • Moving the stop further away during the trade. It changes the ratio you planned and the risk you agreed to.
  • Taking profit early out of fear. Cutting winners short lowers your real ratio and raises the win rate you need.
  • Ignoring costs. On small targets, the spread can turn a 1 : 1.5 into something closer to 1 : 1.

Frequently asked questions

How do you calculate the risk/reward ratio?

Divide the distance from entry to target by the distance from entry to stop. Buying at 100 with a stop at 98 and a target at 104 risks 2 to make 4, a ratio of 1 : 2.

Is a 1:1 risk/reward ratio profitable?

It can be, if you win more than half of your trades after costs. At 1 : 1 the break-even win rate is 50%, so a strategy that wins 60% of the time makes money.

What is a good risk/reward ratio?

There is no single right number. 1 : 2 is common, but a ratio is only good together with the win rate you really get. The two together decide whether a strategy makes money.

What is the difference between risk:reward and reward:risk?

They are the same numbers written the other way round. A risk:reward of 1 : 2 is a reward:risk of 2 : 1.

Should I skip trades below 1:2?

Not automatically. A lower ratio can work if the win rate is high enough. Skip a trade when the ratio and your real win rate together do not reach break-even.

Do costs change the ratio?

Yes. The spread and any commission add to your risk and take from your reward, so the real ratio is a little worse than the one on the chart.

Learn it properly

  1. 1When to Exit a TradeThree exits, all written before you enter.
  2. 2How to Manage Risk in TradingWhere the stop belongs and how big the trade should be.
  3. 3How to Know If Your Trading Strategy Actually WorksRatio, win rate and the number that combines them.

For education only, not financial advice. Trading carries a real risk of losing money. Nothing you enter is saved or sent anywhere: the calculator runs in your browser.