Use our risk reward ratio calculator to calculate your ratio of risk when trading different asset classes such as crypto, stocks, and foreign exchange markets.
Risk Reward Calculator
Risk Reward Ratio: 1:0
Information: A risk reward ratio of 1:5 means that your profit is 5 times bigger than your loss. A higher risk reward ratio is always better!
To use the risk reward calculator, follow these steps:
- Input your entry price (eg. $125, or $25,000)
- Add your stop loss price.
- Finally, insert your take profit price.
- Click Calculate!
Knowing your risk to reward is a critical concept for day traders to create effective strategies. The calculator measures the risk for every dollar spent based on your entry price, stop loss price, and your take profit price. Your take profit price can be calculated by using our take profit calculator.
What is a risk reward ratio calculator?
A risk reward ratio calculator helps traders evaluate whether a trade is worth taking based on the potential profit versus the potential loss.
Also known as a win-loss calculator, this tool is widely used by forex, stock, and crypto traders to assess the expected payoff of a trade relative to the risk taken. It helps you determine if the potential reward justifies the risk you’re about to take.
In general, a risk-to-reward ratio of 1:2 or higher is considered favorable — meaning you’re aiming to earn at least twice as much as you risk. This benchmark helps maintain a disciplined approach to trading and improves long-term profitability.
How does the risk reward ratio calculator work?
The risk reward ratio calculator works by comparing how much you’re risking on a trade versus how much you stand to gain.
You simply enter your entry price, stop-loss level, and take-profit target. The calculator then shows your risk-to-reward ratio — a number that tells you how many units of potential reward you’re getting for every unit of risk. For example, a ratio of 1:3 means you’re risking $100 to potentially gain $300.
This calculation helps traders quickly assess if a trade setup is worth taking. A higher ratio typically means a more attractive trade, assuming the strategy and market conditions support it. The calculator removes guesswork and encourages more disciplined risk management.
Why this topic matters to traders?
Using a risk reward win ratio calculator to understand your overall risk is beneficial for traders because:
- It helps traders make more informed decisions and it gives them the control to choose between taking a trade or waiting for a better opportunity seen from a risk profile.
- It helps you manage risk much better. If you calculate your risk reward and realize that it is less than 1:2, you will probably want to skip that and save the risk for a better trade.
- It improves profitability. Knowing your total reward in comparison to your risk can tell you how profitable your trade will be. It cannot tell you the chance of winning but it can tell you how much you will win if the trade is a winner.
Here is an example to give you a better idea
Let’s say that you are trading stocks with leverage and you want to enter a stock at $50, your stop loss price is at $48, and your take profit is at $58.
In this scenario, our potential profit is $8, and the potential loss is $2. To calculate the win loss ratio you need to divide the profit by the loss.
If we use our calculator for risk to reward above, it will give us a risk reward ratio of 4.
Knowing this, we can enter the trade with a positive expectancy as long as we have a good trading strategy for leveraged products.
Keep in mind that a ratio of 2 lets you have a win ratio of 50% and still break even. If you have a ratio of 3 you can afford to lose 66% of the time and still break even.
Formula used
When we are calculating risk reward this formula is used:
‘Risk Reward Ratio = (Take Profit Price – Entry Price) / (Entry Price – Stop Loss Price)’
Additional tips we find helpful
- The risk reward ratio calculator is not to be used on its own. Always make sure to have a solid trading plan and a strategy that you know has the potential to win. Combine this with a good risk reward ratio and you will excel in your trading.
- The stop loss is exceptionally important when calculating the win to loss ratio. If you can’t define your risk, your setups become random and so will your trading results.
- Don’t change the inputs after entering a trade. Once you have chosen the entry price, stop loss price, and take profit price you need to see your trade through until it is closed. Changing the parameters will negatively influence the results since your calculations will not be correct and in the long run, your results will suffer.
FAQ
You want to make sure that your inputs match the true prices for your trade. This means that if you add an entry price of $250 to the calculator you need to stick to that entry price and enter at that price. The same thing goes for the stop loss and the take profit.
Only reassess your risk reward ratio if your trade plan or setup has changed. If your plan stays the same, stick with the same calculations.
Most beginners tend to have very poor risk profiles and they tend to settle with a risk-reward ratio of 1.2 or 1.5 which is not a good ratio. Try to aim for a better ratio of at least 2 or more.
Typically, a win-loss ratio of more than 2 is always good since it lets you have a win rate of only 50% to break even.
