Risk/Reward Calculator
Calculate your Risk:Reward ratio based on Entry, Stop Loss, and Take Profit levels.
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Understanding Risk-to-Reward Ratio
What is Risk-to-Reward Ratio?
The risk-to-reward ratio (R:R) measures the potential profit of a trade relative to its potential loss. It helps traders manage their risk and ensure that their winning trades are larger than their losing trades. For example, an R:R ratio of 1:2 means you are risking $1 to potentially make $2.
Why is R:R Important?
A positive risk-to-reward ratio allows you to be profitable even if your win rate is less than 50%. If you consistently trade with a 1:2 ratio, you only need to win 34% of your trades to break even. Professional traders often look for setups that offer at least a 1:2 or 1:3 ratio before entering.
How to Use the Calculator
Simply enter your intended Entry Price, your Stop Loss level (where you will exit if the trade goes against you), and your Take Profit level (your target price). The calculator will automatically determine whether you are taking a long or short position, calculate the pip distance for both risk and reward, and give you the final ratio.
Frequently Asked Questions
What is considered a good risk-to-reward ratio?
Most successful traders aim for a minimum of 1:2 risk-to-reward. Some trend-following strategies might look for 1:3 or even 1:5, while scalping strategies might use 1:1 with a very high win rate. Ultimately, your R:R must be paired with your win rate to determine your expectancy.
Should I change my Stop Loss to improve the ratio?
No. Your Stop Loss should be placed based on technical analysis (e.g., below a support level or recent swing low), not arbitrary math. If the technical stop loss makes the R:R ratio worse than your minimum threshold (e.g., 1:2), you should simply skip the trade.