Risk/Reward Calculator
Evaluate whether a trade setup is worth taking before you risk capital.
How to Use the Risk/Reward Calculator
The risk/reward ratio compares how much you stand to lose versus how much you stand to gain on a trade. A ratio of 1:2 means you are risking $1 to potentially make $2. This is one of the most critical metrics for long-term trading success.
The Formula
R:R = |Take Profit - Entry| ÷ |Entry - Stop Loss|
What Is a Good Risk/Reward Ratio?
1:2 or better
Favorable
1:1.5 to 1:2
Acceptable
Below 1:1.5
Unfavorable
Break-Even Win Rate Explained
The break-even win rate tells you the minimum percentage of trades you need to win to avoid losing money. For a 1:2 risk/reward, you only need a 33.3% win rate to break even. For a 1:1 ratio, you need 50%.
Example: Why R:R Matters
| R:R Ratio | Win Rate Needed | With 40% Win Rate |
|---|---|---|
| 1:1 | 50% | Losing money |
| 1:2 | 33.3% | Profitable |
| 1:3 | 25% | Highly profitable |
| 1:5 | 16.7% | Very profitable |
Tips for Better Risk/Reward
- Only take trades with a minimum 1:2 risk/reward ratio
- Place stop losses at logical support/resistance levels, not arbitrary points
- Let winners run — avoid cutting profits short out of fear
- Track your actual R-multiples over time to see if your targets are realistic
Track your R-multiples automatically
LogYourTrade calculates R-multiples for every trade and shows your expectancy over time.
Start Free Trial