Risk / Reward Calculator
Enter your entry, stop and target to see the risk/reward ratio before you commit — for long or short trades.
The risk/reward ratio compares how much you stand to lose if a trade hits your stop with how much you aim to gain at your target. It's one of the simplest yet most useful checks you can run before entering — but only meaningful alongside your win rate.
When to use this tool
- Before entering a trade, to confirm the potential reward justifies the risk.
- When comparing two possible setups to see which offers a better ratio.
- While planning where to place your stop loss and target on the chart.
How the calculation works
The calculator measures the distance from your entry to your stop (the risk) and from your entry to your target (the reward), then divides reward by risk. The direction determines which side is which.
Long: risk = entry − stop reward = target − entry Short: risk = stop − entry reward = entry − target Ratio = reward ÷ risk
A result of 1:2 means you are risking one unit to potentially make two. If the stop or target is on the wrong side of entry for your chosen direction, the tool flags it rather than returning a misleading number.
Practical example
On a long EUR/USD trade you enter at 1.1000, place a stop at 1.0950 (50 pips of risk) and a target at 1.1100 (100 pips of reward). The ratio is 100 ÷ 50 = 1:2 — you're risking one unit to make two. Whether that's worthwhile depends on how often your setup actually reaches target.
Common mistakes
- Judging a ratio in isolation — a 1:3 ratio loses money if you only hit target one time in five. Pair it with your win rate.
- Setting the target first and forcing the stop to fit, instead of placing the stop where the trade is genuinely invalidated.
- Chasing very high ratios with unrealistic targets that are rarely reached.
Frequently asked questions
What is a good risk/reward ratio?
There is no universally good ratio — it only means something alongside your win rate. A 1:2 can be profitable at a modest win rate, while a 1:1 needs a higher one. What matters is positive expectancy across many trades.
How do I calculate risk/reward?
Divide the distance from entry to target (reward) by the distance from entry to stop (risk). Risking 50 pips to make 100 is a 1:2 ratio. This calculator does it automatically for long and short trades.
Why does the calculator warn me about my stop or target?
For a long trade the stop should sit below entry and the target above it; for a short trade it is reversed. If your inputs break that logic, the tool warns you instead of returning a misleading ratio.
Does a higher ratio mean a better trade?
Not on its own. Higher reward targets are often reached less frequently, which lowers your win rate. The best ratio is the one that maximises expectancy for your actual strategy.
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