Risk/Reward Ratio Calculator
The risk/reward ratio compares how much you could lose to how much you could gain on a trade. Enter your entry price, stop-loss price, and target price below to get the ratio instantly — along with the win rate you would need just to break even. This tool assumes a long trade, and everything runs in your browser; nothing you type is sent anywhere.
How the Risk/Reward Calculator Works
The math is straightforward: risk per share = entry price − stop-loss price, and reward per share = target price − entry price. Dividing the reward by the risk gives the ratio, which is usually written as 1 : X so it is easy to read at a glance. For example, an entry of $50 with a stop at $45 and a target of $65 means you risk $5 to make $15 — a risk/reward ratio of 1:3. Because both prices sit either side of your entry, the ratio captures the full downside-versus-upside shape of the trade before you commit.
What the Break-Even Win Rate Means
The break-even win rate is the minimum share of trades you must win just to break even, and it equals risk ÷ (risk + reward). The better your ratio, the lower that bar: a 1:3 trade only needs to win 25% of the time to break even, so even a strategy that loses three trades out of four can stay flat. That is why a favorable ratio takes so much pressure off your win rate — but it only works if you actually honor your stop. Sticking to a plan under pressure ties directly to trading psychology and discipline, where the urge to move a stop or hold a loser is where many beginners undo an otherwise sound setup.
Using Risk/Reward in a Plan
Favorable ratios let you be profitable even with a modest win rate, which is what makes risk/reward one of the most useful numbers to check before every trade. On its own, though, a ratio is not a strategy. Combine it with sensible position sizing — so a single loss never dents your account too badly — and a clear approach from our guide to trading strategies for beginners. You can rehearse the whole process risk-free in CustomStocks, setting entries, stops, and targets with virtual money and real market prices.
Frequently Asked Questions
Risk per share is your entry price minus your stop-loss price, and reward per share is your target price minus your entry price. Divide the reward by the risk to get the ratio. For example, risking $5 to make $15 is a risk/reward ratio of 1 to 3. This calculator does the math and also shows the win rate you would need to break even.
Many traders look for a ratio of at least 1 to 2, meaning the potential reward is at least twice the risk, though the right target depends on your strategy. A favorable ratio lets you stay profitable even if you lose more trades than you win, which is why risk/reward is often considered more important than win rate alone.
The break-even win rate is the minimum percentage of trades you must win just to avoid losing money, given your risk/reward ratio. It equals the risk divided by the sum of risk and reward. For a 1 to 3 ratio, the break-even win rate is 25%, so you only need to win a quarter of your trades to break even before costs.
Practice Planning Trades Free
Download CustomStocks free from the App Store to plan entries, stops, and targets and test your risk/reward setups with virtual money and real market prices. No account required. Android coming soon.
