Risk/Reward Ratio Calculator
Evaluate trade setups by calculating risk/reward ratios and required win rates. A good R:R ratio means you can be profitable even with a lower win rate — this tool shows you exactly what win rate you need to break even.
Supports multiple take profit levels for partial profit taking strategies. Works for both long and short positions.
Your planned entry price
Stop loss below entry
Position size to calculate dollar risk/reward amounts
Set percentage of position to close at each take profit level
Risk/Reward Analysis
Weighted R:R Ratio
3.50:1
Take Profit Breakdown
R:R Ratio Comparison
- R:R Ratio
Want these limits enforced automatically?
Jungle Rebounder helps execute structured strategies with hard caps.
See Jungle RebounderHow It Works
Calculation Methodology
Risk/Reward ratio measures how much you stand to gain versus how much you risk. A 2:1 ratio means you risk $1 to make $2.
Key Insight: A good R:R ratio allows you to be profitable with a lower win rate. A 3:1 ratio means you only need 25% win rate to break even — every win covers 3 losses. Focus on finding setups with good R:R rather than trying to win every trade.
Example Scenario
Setup: Long BTC at $50,000, stop at $49,000, target at $52,000
What this means: You risk $1,000 to make $2,000. With a 2:1 ratio, you only need to win 33% of trades to break even. If you win 40% of trades, you're profitable.
Common Mistakes & Warnings
- ⚠Ignoring R:R: Taking trades with poor R:R (below 1.5:1) requires unrealistic win rates. Even 60% win rate isn't enough if your R:R is 0.5:1.
- ⚠Moving stops for better R:R: Don't widen stops just to improve R:R — that increases actual risk. Set stops based on technical levels, not desired ratios.
- ⚠Not using partial profits: Taking 50% at 2:1 and 50% at 4:1 improves your effective R:R and reduces stress. Always consider multiple targets.
- ⚠Overestimating win rate: Most traders overestimate their win rate. If you think you win 60% but actually win 40%, you need better R:R ratios to compensate.
- ⚠Ignoring slippage: Actual risk can be higher than calculated due to slippage. Add a buffer to your risk calculations, especially with tight stops.
Example Scenarios
Try these realistic scenarios to understand risk/reward ratios in different setups.
Scenario 1: Conservative 2:1 Setup
Standard professional setup with 2:1 risk/reward ratio. Requires 33% win rate.
Step-by-Step Calculation:
- Risk: $50,000 - $49,000 = $1,000
- Reward: $52,000 - $50,000 = $2,000
- R:R Ratio: $2,000 ÷ $1,000 = 2:1
- Required Win Rate: 1 ÷ (1 + 2) = 33%
What this means: With a 2:1 ratio, you only need to win 33% of trades to break even. If you win 40% of trades, you're profitable. This is the standard professional approach.
Scenario 2: Multiple Take Profits
Partial profit taking strategy. Take 50% at 2:1, let 50% run to 4:1.
Step-by-Step Calculation:
- Risk: $1,000 (same for both TPs)
- TP1 Reward: $2,000 (2:1 R:R)
- TP2 Reward: $6,000 (6:1 R:R)
- Weighted R:R: (2 × 0.5) + (6 × 0.5) = 4:1
- Required Win Rate: 1 ÷ (1 + 4) = 20%
What this means: By taking partial profits, you lock in a win on half the position at 2:1, while still capturing larger moves. The weighted R:R is 4:1, requiring only 20% win rate. This strategy reduces stress and improves overall profitability.
Scenario 3: Poor R:R Ratio
Example of a trade with poor risk/reward. Shows why it's not worth taking. ⚠️ Not recommended
Step-by-Step Calculation:
- Risk: $1,000
- Reward: $1,000
- R:R Ratio: 1:1
- Required Win Rate: 1 ÷ (1 + 1) = 50%
What this means: With a 1:1 ratio, you need 50% win rate just to break even. To be profitable, you need to win more than 50% of trades — which is difficult to maintain long-term. This trade is not worth taking unless you have extremely high confidence.
Warning: Trades with R:R below 1.5:1 are rarely worth taking. Focus on finding setups with better risk/reward ratios instead of trying to win every trade.
Frequently Asked Questions
When should I use this tool?
Use this tool before every trade to evaluate if the setup is worth taking. A good risk/reward ratio (2:1 or better) means you can be profitable even with a lower win rate. Never take trades with poor R:R ratios — they require unrealistic win rates to be profitable.
What's a good risk/reward ratio?
Most professional traders aim for at least 2:1 (risk $1 to make $2). This means you can be profitable with a 33% win rate. 3:1 is excellent — you only need 25% win rate. Below 1.5:1 is generally not worth taking unless you have very high win rate (70%+).
How do I calculate risk/reward ratio?
Risk/Reward = (Entry Price - Stop Loss) / (Take Profit - Entry Price) for longs, or (Stop Loss - Entry Price) / (Entry Price - Take Profit) for shorts. The tool calculates this automatically based on your entry, stop, and target prices.
Should I use multiple take profit levels?
Yes — partial profit taking improves win rate and reduces stress. For example, take 50% at 2:1 R:R and let 50% run to 4:1. This gives you a guaranteed win on half the position while still capturing larger moves. Use the tool to see how partial profits affect your overall R:R.
What win rate do I need to be profitable?
Required win rate = 1 / (1 + R:R). For 2:1 R:R, you need 33% win rate. For 3:1, you need 25%. The tool shows this automatically. If your actual win rate is below the required rate, you'll lose money long-term even with good R:R ratios.
Does position size affect risk/reward ratio?
No — R:R ratio is independent of position size. A 2:1 ratio means the same whether you risk $100 or $1,000. However, position size determines your actual dollar risk and reward amounts. The tool shows both the ratio and dollar amounts if you provide position size.
Should I adjust stops to improve R:R?
Only if it makes technical sense. Don't widen stops just to get better R:R — that increases your actual risk. Instead, look for setups where the natural stop (support/resistance) is close and the target (resistance/support) is far. Good R:R comes from good setups, not forced stops.
What if my R:R is less than 1:1?
Avoid these trades unless you have extremely high win rate (80%+). A 0.5:1 ratio means you risk $2 to make $1 — you need 67% win rate just to break even. These trades are rarely worth it. Focus on finding setups with better R:R instead.
How does leverage affect risk/reward?
Leverage doesn't change your R:R ratio — it's based on price movement, not position size. However, leverage amplifies both your risk and reward dollar amounts. A 2:1 R:R with 10x leverage still has 2:1 ratio, but you risk and gain more dollars per price movement.
Can I use this for spot trading?
Yes — R:R ratios work the same for spot and futures. The calculation is identical: distance to stop vs distance to target. The only difference is that futures might have funding costs that slightly reduce effective reward, but the core R:R concept is the same.
Related Tools
Trade Expectancy Calculator
Calculate expected value per trade based on win rate, average win, and average loss. Find profit factor, expectancy ratio, and expected returns over time.
Same category
Win Rate Required Calculator
Calculate minimum win rate needed to be profitable given risk/reward ratio. Find break-even win rate and expected value per trade.
Related category