Risk/Reward Ratio Calculator

Worked Examples

How to Use This Calculator

1. Enter your entry price — the exact price at which you plan to open the position.
2. Set your stop loss — the price where you would close the trade to cap your loss. Place this at a technically meaningful level, not arbitrarily.
3. Set your take profit — your target exit price. The calculator auto-detects whether you are going long or short based on these three prices.
4. Add your win rate (optional) — if you track your historical win rate on similar setups, enter it here to calculate expected value per share.
5. Click Calculate — review the R:R ratio, minimum win rate, and expected value. Only take trades where your edge justifies the risk.

Frequently Asked Questions

What is a good risk/reward ratio?

Most traders aim for at least a 1:2 ratio — risking $1 to make $2. At 1:2, you only need to win 33% of trades to break even, giving you a large margin for error. Trend-following strategies often target 1:3 or higher to remain profitable even with win rates below 40%.

How does expected value differ from R:R ratio?

The R:R ratio tells you the theoretical structure of one trade. Expected value combines that structure with your actual win rate to estimate average profit per trade over many repetitions. A high R:R ratio with a very low win rate can still be negative EV — which is why both metrics matter.

How do I know if a trade has a positive edge?

A trade has a positive edge when expected value is greater than zero. This requires your actual win rate to exceed the minimum win rate the R:R ratio demands. For example, a 1:2 setup needs a 33%+ win rate to be profitable — if you historically win 50% on those setups, you have a meaningful edge.

Should I always take the highest R:R trade?

Not necessarily. A 1:5 trade might look attractive, but if reaching that target requires price to break through multiple resistance levels, your actual win rate may be very low. Balance R:R ratio with realistic probability — wide targets that are rarely hit often produce worse expected value than tighter, more achievable ones.

Does this calculator work for options and futures?

Yes. For options, enter your effective cost basis as the "entry price," your max loss level as the stop, and your target exit value as take profit. The R:R and expected value math applies identically, though options have additional factors like time decay and implied volatility that affect actual win rates.