Risk Reward Calculator for Trading

Use this risk/reward calculator to compare planned loss with potential profit before entering a trade. Enter entry, stop loss, target, and win rate to estimate R:R, break-even win rate, and setup quality.

Best for

Checking whether a planned setup offers enough potential reward compared with the stop-loss risk.

What you get

Risk/reward ratio, break-even win rate, reward distance, and a quick expected value verdict.

Not for

Approving trades without considering execution quality, fees, slippage, win rate, and market context.

Formula

Risk/reward = absolute target distance / absolute stop distance

Example

A 2.5R setup needs about 28.6% win rate to break even before costs.

Hexaplan verdict

Great setups combine enough R with a realistic win rate.

Risk/reward formula

Risk/reward ratio = target distance / stop-loss distance.

A 2R setup means the potential reward is two times the planned risk. Break-even win rate = 1 / (1 + risk/reward).

Risk/reward example

If your entry is $100, stop loss is $98, and target is $105, the stop distance is $2 and the target distance is $5. The setup is 2.5R and needs about a 28.6% win rate to break even before costs.

Why break-even win rate matters

A high R setup can tolerate a lower win rate, while a low R setup needs a higher win rate. Risk/reward only becomes useful when compared with your realistic hit rate and execution costs.

How to use this calculator

Enter your planned entry price.
Enter your stop-loss price.
Enter your target price.
Add your estimated win rate.
Compare your win rate with the break-even win rate.
Reject setups where costs or execution make the edge too thin.

Common risk/reward mistakes

Moving the target just to make the R:R look better.
Ignoring probability and only chasing high R setups.
Forgetting spreads, commissions, and slippage.
Using a stop loss that does not match market structure.
Confusing potential reward with expected value.

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FAQ

How do I calculate risk/reward ratio?

Divide the distance from entry to target by the distance from entry to stop loss.

What is a good risk/reward ratio?

It depends on win rate. A 2R setup can be strong with a realistic win rate, but a 5R setup can still fail if it rarely reaches target.

What is break-even win rate?

Break-even win rate is the minimum win rate needed before costs. It is calculated as 1 divided by 1 plus the risk/reward ratio.

Does this include trading fees?

No. You should account for commissions, spreads, slippage, and funding costs separately.

Can I use this for stocks, forex, crypto, or futures?

Yes. The ratio works across markets, but contract values, leverage, and execution costs can change the real dollar outcome.