Risk/Reward Calculator
Calculate risk/reward ratio for your trades and analyze potential outcomes
The price at which you plan to enter the trade
Your maximum acceptable loss level
The risk/reward ratio measures the potential profit of a trade compared to its potential loss. It's one of the most important metrics for evaluating trade quality.
Understanding the Ratio:
- • 1:1 = Risk $100 to make $100
- • 1:2 = Risk $100 to make $200
- • 1:3 = Risk $100 to make $300
A higher ratio means you stand to gain more relative to what you're risking, making the trade more attractive from a risk management perspective.
Formula:
Risk = |Entry Price - Stop Loss|
Reward = |Take Profit - Entry Price|
Ratio = Reward / Risk
Example:
Entry: 1.0850, Stop Loss: 1.0800, Take Profit: 1.0950
Risk = 50 pips, Reward = 100 pips
Ratio = 1:2
Minimum 1:2 ratio: Aim for at least 2x reward vs risk
Professional traders: Often target 1:3 or higher ratios
Avoid 1:1 or lower: Requires very high win rate to be profitable
Multiple targets: Use scaled take profits (TP1, TP2, TP3) to maximize gains
Win rate matters: With 1:2 ratio, you can be profitable with 40% win rate