Risk/Reward Calculator
Calculate the potential risk and reward of a trade using your entry price, stop-loss price, take-profit target and position size.
What is a risk-to-reward ratio?
A risk-to-reward ratio compares the potential loss on a trade with its potential profit. It helps traders assess whether the potential reward justifies the amount being risked.
How to calculate risk and reward
For a long trade, risk is the difference between the entry price and the stop-loss price. Reward is the difference between the take-profit price and the entry price.
For short trades, the calculations are reversed because the trader aims to profit from falling prices.
Reward-to-Risk Multiple = Potential Profit ÷ Potential Loss
Risk/reward example
Suppose you buy 20 shares at $100 each, place your stop-loss at $95 and set a take-profit target at $110.
Your potential loss is $100 and your potential profit is $200. This produces a risk-to-reward ratio of 1:2.
What is the break-even win rate?
The break-even win rate is the percentage of winning trades needed to offset losing trades when the average profit and loss match the calculated reward and risk.
Break-Even Win Rate = Risk ÷ (Risk + Reward) × 100
For a 1:2 risk-to-reward ratio, the theoretical break-even win rate is approximately 33.33%.
Important trading considerations
This calculator assumes each one-dollar price change produces a one-dollar profit or loss per unit. It is suitable for stocks, spot cryptocurrency and similar linear-priced assets.
Forex, futures and derivatives may require additional calculations for contract size, pip value or currency conversion.
Trading fees, spreads, slippage and price gaps can affect actual profits and losses. The calculated break-even win rate does not account for these costs.
This calculator is for educational purposes only and does not constitute financial advice.