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Before entering any trade, you need to answer one question: is the potential reward worth the risk? A risk-reward calculator answers this in seconds. Enter your entry price, stop loss, and target - and see whether the math justifies the trade. If the ratio is below 2:1, the trade is working against you statistically.
Enter entry, stop loss, and target - see if the trade is worth taking.
Open Risk Reward CalculatorRisk-to-Reward Ratio = (Target - Entry) / (Entry - Stop Loss)
| Entry | Stop Loss | Target | Risk/Share | Reward/Share | R:R Ratio | Min Win Rate |
|---|---|---|---|---|---|---|
| $100 | $95 | $110 | $5 | $10 | 2.0:1 | 33% |
| $100 | $95 | $115 | $5 | $15 | 3.0:1 | 25% |
| $100 | $95 | $120 | $5 | $20 | 4.0:1 | 20% |
| $100 | $97 | $106 | $3 | $6 | 2.0:1 | 33% |
| $100 | $92 | $108 | $8 | $8 | 1.0:1 | 50% |
| $100 | $90 | $105 | $10 | $5 | 0.5:1 | 67% |
The last two rows show poor setups. A 1:1 ratio requires winning more than half your trades. A 0.5:1 ratio means you need to win 67% of trades just to break even - extremely difficult to maintain.
Before analyzing the chart, before reading the news, before checking your indicators - calculate R:R. If the ratio is below 2:1, skip the trade. You are volunteering for bad odds.
On a $50,000 account risking 1% ($500 per trade):
| R:R Ratio | Risk | Potential Profit | 10 Trades at 40% Win Rate | Net P&L |
|---|---|---|---|---|
| 1:1 | $500 | $500 | 4 wins ($2,000) - 6 losses ($3,000) | -$1,000 |
| 2:1 | $500 | $1,000 | 4 wins ($4,000) - 6 losses ($3,000) | +$1,000 |
| 3:1 | $500 | $1,500 | 4 wins ($6,000) - 6 losses ($3,000) | +$3,000 |
| 4:1 | $500 | $2,000 | 4 wins ($8,000) - 6 losses ($3,000) | +$5,000 |
At 2:1 R:R, you make money even winning only 4 out of 10 trades. At 1:1, the same 40% win rate loses $1,000. Same win rate, opposite results - the ratio is the difference.
Check R:R before every trade. Takes 5 seconds.
Open Risk Reward Calculator