On this page5 sections
How to Use the Risk Reward Calculator
- Entry. The price where you plan to buy, usually the breakout level or a bounce from support.
- Stop loss. The price that proves the idea wrong, such as just below the last higher low.
- Target. A realistic level where sellers have stepped in before, like the next resistance zone.
- Shares (optional). Add your share count to see the total money at risk and the total reward.
The results update as you type. If the ratio is below 2 : 1, the calculator flags it so you can rethink the target, the stop or the trade itself.
The Reward to Risk Formula
Reward to risk ratio
R : R = (Target − Entry) ÷ (Entry − Stop loss)
With an entry at $50, a stop at $48 and a target at $56, you risk $2 to make $6, a ratio of 3 : 1. The break-even win rate is 1 ÷ (1 + 3), or 25%: if one trade in four reaches its target and the rest hit their stops, you roughly break even before costs.
That is why the ratio matters. A higher ratio means you can be wrong more often and still come out ahead. It pairs naturally with the Sizing calculator tool, which turns the same entry and stop into a share count.
What Is a Good Risk Reward Ratio?
Many disciplined swing traders look for at least 2 : 1 before they take a trade. Below that, the win rate needed to stay profitable climbs quickly, and costs eat into thin edges.
- 1 : 1 needs a win rate above 50% just to break even.
- 2 : 1 breaks even at about 33% winners.
- 3 : 1 breaks even at 25% winners.
A big ratio on paper is not enough on its own. The target must sit where the chart gives price room to run, and the stop must sit where the setup is truly broken. Our guide to Stop placement covers both.
What This Calculator Cannot Tell You
- It does not know how likely the target is. That comes from your chart work and your own records.
- It leaves out commissions, spreads and slippage.
- Gaps can open past your stop, so a real loss can be larger than planned.
Use the ratio as a filter, not a promise. Record every planned ratio in your journal and compare it with what actually happened.
Risk Reward Questions
Should I move my target to improve the ratio?
Only if the chart supports it. Stretching a target to make the numbers look better is one of the most common planning mistakes.
Can I tighten the stop instead?
A stop placed inside normal daily noise gets hit often. Keep the stop where the idea is wrong, and pass on trades that do not offer enough reward from there.
Where do I record the ratio?
Write it in your plan before entry, then log the result afterwards in a free Trading Journal Template to see your real numbers over time.