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 or Google Play to plan entries, stops, and targets and test your risk/reward setups with virtual money and real market prices. No account required.
