Risk/Reward Calculator

Calculate your risk-to-reward ratio before entering any trade. Know if the trade is worth taking.

Risk/Reward Analysis
Risk : Reward
1:3
Excellent trade setup
Risk (pips/points) 5.00
Reward (pips/points) 15.00
Min Win Rate Needed 25%
Breakeven After Losses 3 losses
Stop: 95.00 Entry: 100.00 Target: 115.00

What is Risk/Reward Ratio?

The risk/reward ratio (R:R) compares how much you're risking on a trade versus how much you stand to gain. It's one of the most important metrics for evaluating trade quality before you enter.

R:R = Risk ÷ Reward = (Entry - Stop Loss) ÷ (Take Profit - Entry)
A ratio of 1:3 means you risk $1 to potentially make $3

Why R:R Matters More Than Win Rate

Many traders obsess over win rate, but risk/reward is actually more important. With a 1:3 R:R ratio, you only need to win 25% of your trades to break even. This means you can be wrong 3 times out of 4 and still not lose money.

R:R Ratio Min Win Rate Edge After Wins
1:1 50% Need high accuracy
1:2 33% Win 1 in 3
1:3 25% Win 1 in 4
1:4 20% Win 1 in 5
1:5 17% Win 1 in 6

How to Use Risk/Reward in Trading

1. Set Stop Loss First

Your stop loss should be based on market structure — below support for longs, above resistance for shorts. Never adjust your stop to fit a desired R:R; that's backwards thinking.

2. Identify Realistic Targets

Take profit levels should also be based on structure — previous highs/lows, supply/demand zones, or Fibonacci extensions. Don't set arbitrary targets just to get a good R:R.

3. Filter Low R:R Trades

If the calculation shows 1:1 or worse, consider skipping the trade unless you have a very high win rate strategy. Most professional traders won't take anything below 1:2.

4. Consider Partial Takes

You can take partial profits at 1:1 to lock in gains, then let the rest run for higher R:R. This balances security with profit potential.

Frequently Asked Questions

What is a good risk-reward ratio?
A minimum of 1:2 (risking $1 to make $2) is commonly recommended. This means you can be wrong 50% of the time and still be profitable. Many professional traders aim for 1:3 or higher on their best setups.
How do you calculate risk-reward ratio?
Risk/Reward = (Entry Price - Stop Loss) / (Take Profit - Entry Price) for long trades. For example, if you buy at $100 with a stop at $95 and target at $115, your R:R is ($100-$95)/($115-$100) = 5/15 = 1:3.
Is 1:1 risk-reward good?
A 1:1 ratio means you need to win more than 50% of trades to be profitable. While it can work with a high win rate strategy (like scalping), most traders prefer 1:2 or higher because it provides more margin for error.
What win rate do I need for different R:R ratios?
For 1:1 R:R you need >50% wins, for 1:2 you need >33% wins, for 1:3 you need >25% wins. Higher R:R ratios allow you to be profitable with lower win rates, which is why they're preferred by swing traders.
Should I always use a fixed risk-reward ratio?
Not necessarily. Your take profit should be based on market structure (support/resistance levels), not arbitrary ratios. However, knowing your R:R before entering helps you filter out trades that don't offer enough reward for the risk.

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Track Your Real R:R Performance

Knowing R:R before a trade is step one. TSB Pro tracks your actual R:R across all trades and shows which setups give you the best risk-adjusted returns.

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