Risk reward calculator: ratio, targets and break-even rate

SideA long gains as the price rises; a short gains as it falls

Quote currencyA label only; nothing is converted

Entry priceThe planned entry

Stop priceBelow the entry on a long, above it on a short

Target priceAbove the entry on a long, below it on a short

Fee per side (%)Charged on the entry and again on the exit

Risk/reward after fees—

Risk/reward before fees—

Risk per unit—

Reward per unit—

Risk per unit, fees included—

Reward per unit, after fees—

Stop distance—

Target distance—

Break-even win rate before fees—

Break-even win rate after fees—

Defaults are hypothetical and are not a suggested ratio, stop distance or win rate. A ratio says nothing about how likely the target is, and the break-even win rate is a floor, not a prediction. A stop can fill worse than its price in a fast market.

How to calculate the risk reward ratio

The risk reward ratio compares what a trade stands to lose at the stop with what it stands to gain at the target. The calculator writes it as 1:R, where R is the reward for each unit of risk.

Long: risk per unit = entry − stop, reward per unit = target − entry

Short: risk per unit = stop − entry, reward per unit = entry − target

R = reward ÷ risk

Stop distance = risk ÷ entry, target distance = reward ÷ entry

Fees make both sides worse, because you pay on the way in and again on the way out:

Risk with fees = risk + (entry + stop) × fee

Reward after fees = reward − (entry + target) × fee

The fee arithmetic is the same as in the crypto position size calculator, which also works out how much to trade. This page does not size positions.

Worked example

The mirror image as a short, with an entry of 200, a stop of 210 and a target of 185, gives a risk of 10.41 USD and a reward of 14.615 USD after fees. That is also 1:1.40, with a break-even win rate of 41.6%.

The break-even win rate, and why it is only a floor

The break-even win rate is the share of trades that has to reach the target for a series of identical trades to net to zero. It follows from the arithmetic: with win rate w, wins earn w × R and losses cost (1 − w) × 1, and these are equal when:

w = 1 ÷ (1 + R)

After fees, use the two net figures: w = risk with fees ÷ (risk with fees + reward after fees).

A ratio says nothing about how likely the target is. A farther target improves the ratio on paper and may simply be reached less often. So the break-even rate is a floor to compare against your own records and not a prediction, and this page shows no expected result over a number of trades.

What fees do to the ratio

Fees shrink the reward and enlarge the risk, so they cost more when the stop and target are close to the entry.

If fees take the whole reward, the tool says so and shows no break-even rate, since a win would still lose. For your platform's actual costs, see the crypto trading fee calculator.

A stop price is not a fill price

The calculator treats the stop as the price you exit at, and a real stop can fill worse. FINRA says a stop order becomes a market order when the stop price is reached, and that the price at which it executes may be very different from the stop price, especially in volatile markets. A stop-limit order controls the price but may not fill at all. So the risk here is the planned risk and not the most you can lose. The same applies to a target reached by a market order: a take-profit fill can differ from the typed price. Limits in software are covered in trading bot risk management.

Which values to enter

• Side: on a long, the stop goes below the entry and the target above it; on a short, the other way round. The tool flags the wrong side.
• Entry, stop, target: your own planned prices. The currency field only changes the label.
• Fee per side: from your platform's fee schedule. The 0.1% default is an example only.

Frequently asked questions

What is a risk reward ratio?

It compares the planned loss at the stop with the planned gain at the target. At 1:1.5, a trade risks 1 to make 1.5. It describes the prices you typed and not how likely either one is.

How do you calculate the risk reward ratio?

Divide the reward per unit by the risk per unit. A long at 200 with a stop at 190 and a target at 215 risks 10 to make 15, so the ratio is 1:1.50 before fees.

What is a good risk reward ratio?

This page recommends none. A ratio means little without the chance of reaching the target, and that depends on your rules and market. The calculator shows the win rate a given ratio needs in order to break even.

How do I calculate a take profit price from a ratio?

On a long, target = entry + R × (entry − stop); on a short, target = entry − R × (stop − entry). With an entry of 200, a stop of 190 and R of 1.5, that gives 215. Choosing R is your decision.

What win rate do I need to break even?

One divided by one plus R, before fees: 40% at 1:1.5 and 50% at 1:1. Fees raise it, and it is a floor and not a prediction.

Does this calculate position size?

No. It works per unit, so the ratio does not depend on size. The crypto position size calculator works out a quantity from your account and the risk you choose.

Sources

• FINRA: Order types (market, limit and stop orders) (opens in a new tab)
• FINRA Regulatory Notice 21-12: stop orders and stop prices (opens in a new tab)
• FINRA: Understanding order types can save time and money (opens in a new tab)

This calculator is general information, not tax, legal or investment advice. Results depend on the values you enter; fees, margin rules and tax rules differ by exchange and country and change over time, so check the official source and ask a licensed adviser about your own situation. Sources, checks and corrections: see the editorial policy.