Risk/Reward Calculator
Calculate your risk/reward ratio before entering any trade. See required win rate, potential profit and loss, and optimize your position sizing.
Trade Setup
Risk/Reward Analysis
With a 1:2 risk/reward ratio, you only need to win 33.33% of your trades to break even. Risking 50 pips to potentially gain 100 pips.
Always use a stop loss. Never trade without defining your maximum risk. Position sizing and stop losses are essential for long-term survival in trading.
What is Risk/Reward Ratio?
Risk/reward ratio (R:R) compares your potential loss to your potential gain on a trade. A 1:2 ratio means you're risking $1 to potentially make $2.
Understanding and optimizing your risk/reward ratio is one of the most important skills in trading. It directly determines how often you need to win to be profitable.
The Risk/Reward Formula
Required Win Rate by R:R Ratio
Better risk/reward ratios require lower win rates to be profitable. This is why professional traders focus on R:R, not just winning trades.
| Risk:Reward | Required Win Rate | Verdict |
|---|---|---|
| 1:0.5 | 67% | Poor |
| 1:1 | 50% | Break-even |
| 1:1.5 | 40% | Acceptable |
| 1:2 | 33% | Good |
| 1:3 | 25% | Excellent |
Why Risk/Reward Matters
Win Less, Profit More
With a 1:2 R:R, you can be profitable even if you only win 40% of your trades.
Professional Focus
Pro traders focus on R:R ratios, not win rates. Quality over quantity.
Sustainable Trading
Poor R:R requires unrealistic win rates that are impossible to maintain.
Tips for Better Risk/Reward
Set stop loss FIRST — Always determine your risk before calculating position size.
Aim for 1:1.5 minimum — Ideally target 1:2 or better for most trades.
Don't move your stop loss — Never widen stops to "give trades more room."
Use proper position sizing — Calculate lot size based on your risk. Use our Lot Size Calculator.
Frequently Asked Questions
What's a good risk/reward ratio?
Most professional traders aim for at least 1:1.5, with 1:2 or 1:3 being ideal. This means even with a 40-50% win rate, you remain profitable.
Should I always use high R:R ratios?
Not necessarily. Very high R:R (like 1:5) often means your take profit is far away and may rarely get hit. Balance R:R with realistic price targets based on market structure.
How does R:R relate to position sizing?
Your R:R determines how many pips you're risking. Combined with your account risk percentage, this determines your lot size. Use our Lot Size Calculator for proper position sizing.
What win rate do I need to be profitable?
It depends on your R:R ratio. With 1:1, you need >50% wins. With 1:2, you only need >33% wins. With 1:3, just >25% wins. Better R:R means lower required win rate.
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