How do you calculate a risk/reward ratio?

Divide the distance from entry to target by the distance from entry to stop. Entering at $50 with a stop at $47 and a target at $59 is $9 of reward against $3 of risk, a ratio of 3.0 to 1.

What win rate do I need to break even?

One divided by one plus the ratio. At 3:1 you break even winning 25% of the time; at 1:1 you need 50%. This is arithmetic about the ratio itself and says nothing about how often any particular approach actually wins.

Does a higher ratio make a position better?

Not on its own. A distant target improves the ratio on paper but may be reached far less often, and the two move together in practice. The ratio is only half the picture; the frequency of each outcome is the other half, and neither is knowable in advance.

Risk/Reward Ratio Calculator

Compare what a position risks against what it stands to make, and see the win rate that ratio would need just to break even. Arithmetic only — it makes no claim about how often any outcome actually happens.

Entry price$Stop-loss price$Target price$Shares (optional)Adds the dollar risk and reward.Your win rate (optional)%Only if you have measured it. Adds expectancy per share.

Risk / reward ratio: 3.00 : 1
Break-even win rate: 25.0%
Risk per share: $3.00
Reward per share: $9.00

A wider target improves the ratio on paper but is usually reached less often. The ratio is half the picture; how often each outcome occurs is the other half.

How this is calculated

R = (target - entry) / (entry - stop)
break-even win rate = 1 / (1 + R)
expectancy = winRate x reward - (1 - winRate) x risk

entry - stop: risk per share if the stop is hit
target - entry: reward per share if the target is reached
winRate: share of outcomes that reach the target, if you supply one

Worked example

Entry $50.00, stop $47.00, target $59.00 gives $3.00 of risk against $9.00 of reward, a 3.0:1 ratio. At that ratio the break-even win rate is 1 / (1 + 3) = 25%.

Terms used here

Stop Loss: A pre-set price where an investor plans to exit to limit losses. A risk-management reference level, not advice.

Common questions

How do you calculate a risk/reward ratio?: Divide the distance from entry to target by the distance from entry to stop. Entering at $50 with a stop at $47 and a target at $59 is $9 of reward against $3 of risk, a ratio of 3.0 to 1.
What win rate do I need to break even?: One divided by one plus the ratio. At 3:1 you break even winning 25% of the time; at 1:1 you need 50%. This is arithmetic about the ratio itself and says nothing about how often any particular approach actually wins.
Does a higher ratio make a position better?: Not on its own. A distant target improves the ratio on paper but may be reached far less often, and the two move together in practice. The ratio is only half the picture; the frequency of each outcome is the other half, and neither is knowable in advance.

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This tool performs arithmetic on the figures you enter. It is for informational and educational purposes only, is not investment, tax or financial advice, and is not a recommendation to buy, sell, or hold any security. Projections are assumptions, not forecasts. Always do your own due diligence.

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