Risk Reward Calculator

How to Use

Enter your planned entry price, stop loss price, and target price for a trade. The calculator finds risk (distance from entry to stop loss) and reward (distance from entry to target) per share, then expresses them as a risk-to-reward ratio, updating live as you type. This tool works the same way for both long trades (stop below entry, target above) and short trades (stop above entry, target below), since risk and reward are both calculated as absolute price distances.

Why Risk-Reward Ratio Matters Before a Trade, Not After

Risk-reward ratio is meant to be checked before entering a trade, using the stop loss and target levels already planned, not calculated retroactively after the trade has already played out. Its entire purpose is helping decide whether a trade's potential payoff structure justifies the risk being taken, given a specific entry, stop, and target, before any capital is committed. Checking it after the fact tells you nothing useful, the trade's actual outcome already happened by then, this ratio is a pre-trade filter, not a post-trade scorecard.

Worked Example: Calculating and Interpreting the Ratio

Using this tool's own defaults, an entry price of 100, a stop loss at 95, and a target at 115. Risk per share is the distance from entry down to the stop: |100 − 95| = 5. Reward per share is the distance from entry up to the target: |115 − 100| = 15. The ratio is reward divided by risk: 15 ÷ 5 = 3, displayed as 1:3, meaning 1 unit of risk is being taken for every 3 units of potential reward. This is generally considered a favorable ratio, well above the commonly cited 1:2 minimum many traders look for.

Why Risk-Reward Ratio and Win Rate Have to Be Considered Together

A favorable ratio alone doesn't guarantee profitability, it needs to be weighed against how often trades actually hit the target versus the stop loss. The break-even win rate, the minimum percentage of winning trades needed to avoid a net loss over time, is calculated as 1 divided by (1 plus the ratio). For this example's 1:3 ratio, that's 1 ÷ 4 = 25%, meaning a strategy could theoretically lose 3 out of every 4 trades and still break even, provided winners consistently hit the full target and losers are reliably cut at the stop. A strategy with a favorable 1:3 ratio but an actual win rate below 25% would still lose money overall, while the same ratio with a win rate above 25% produces a net profit, this is exactly why ratio and win rate need to be evaluated as a pair, never in isolation.

Setting Realistic Stops and Targets

The most useful risk-reward ratios come from stop loss and target levels grounded in genuine technical analysis, support and resistance levels, recent volatility ranges, or a specific chart pattern's implied target, rather than picked backward purely to produce an attractive-looking ratio. A stop placed at a technically meaningless price just to hit a round-number ratio doesn't actually protect the trade any better, and a target set beyond any realistic resistance level is unlikely to actually be reached. This calculator computes the ratio accurately from whatever prices you enter, but the quality of the underlying trade plan still depends entirely on whether those prices themselves reflect a sound read of the market.

Frequently Asked Questions

What is a good risk-reward ratio?

Many traders look for a risk-reward ratio of at least 1:2, risking ₹1 to potentially make ₹2, so that even a win rate below 50% can still be profitable over many trades. The right ratio depends on your actual win rate and trading strategy.

Does a good risk-reward ratio guarantee a profitable trade?

No, risk-reward ratio only measures the potential payoff structure of a single trade, not the probability of hitting the target versus the stop loss. A favorable ratio paired with a low win rate can still lose money over time.

What win rate do I need to break even at a given risk-reward ratio?

The break-even win rate is 1 divided by (1 plus the reward-to-risk ratio), expressed as a percentage. At a 1:3 ratio, that's 1 divided by 4, or 25%, meaning a trader could theoretically lose 3 out of every 4 trades and still break even overall, as long as every winning trade actually hits the full target and every losing trade is cut at the stop loss. A win rate above that threshold produces a net profit over many trades, below it produces a net loss, even with the same favorable ratio.

How is risk-reward ratio different from a stop-loss percentage?

A stop-loss percentage describes how far below entry the stop sits, in isolation. Risk-reward ratio compares that same risk distance against the reward distance to the target, it's a relationship between two prices, not a standalone measure of either one. Two trades can share an identical stop-loss percentage but have very different risk-reward ratios depending on where the target is set relative to that same stop.

Should the stop loss and target always be set based on a fixed ratio like 1:2 or 1:3?

Not necessarily, many traders set the stop loss first based on a genuine technical level (support, resistance, volatility) rather than an arbitrary distance chosen purely to hit a target ratio, and let the resulting ratio fall out of legitimate price levels rather than forcing the price levels to fit a desired ratio. Working backward from a target ratio to place stops and targets at technically meaningless prices can produce a favorable-looking ratio on paper that doesn't actually reflect realistic support and resistance in the market.

Does this calculator work the same way for both long and short trades?

Yes, since risk and reward are both calculated as absolute distances (using absolute value) from entry to stop and entry to target, the math works identically whether the stop loss sits below entry and the target above it (a long trade) or the reverse, stop above entry and target below it (a short trade). Just enter the actual planned prices for your specific trade direction, the ratio calculation doesn't need to know which direction the trade is.