Risk/Reward Ratio Calculator

The risk/reward ratio compares the distance from entry to stop-loss against the distance from entry to take-profit. A 1:3 R:R risks one unit to make three. Expectancy depends on this ratio combined with win rate — a 30% win rate at 1:3 R:R is profitable; a 60% win rate at 1:1 is barely above breakeven after fees.

Inputs are entry, stop, and target price. Output is the ratio, the implied breakeven win rate, and the per-unit P&L.

The core math: expected value per trade = (win rate × reward) − (loss rate × risk). Setting this to zero gives the breakeven win rate as risk / (risk + reward), or equivalently 1 / (1 + R:R). For 1:1, breakeven win rate is 50%; for 1:2, 33.3%; for 1:3, 25%; for 1:5, 16.7%. This is the win rate you must beat to make money before fees, slippage, and behavioral drag. Real trading strategies operate in the gap between breakeven and actual win rate — that gap is your edge.

A worked example: entry at $100, stop at $95, target at $115. Risk = $5, reward = $15, R:R = 1:3. Breakeven win rate = 25%. If your strategy historically wins 35% of the time, expected value per trade = (0.35 × $15) − (0.65 × $5) = $5.25 − $3.25 = $2.00 per unit risked. Position size determines absolute returns: risking $500 (100 units of $5 each) gives expected $200 per trade. Over 100 trades, expected $20,000 — but variance is large; drawdowns of 10+ losing trades in a row are routine even at 35% win rate.

Limitations: R:R assumes binary outcomes (stop or target hits) at the predetermined price. Real exits include partial profit-taking, trailing stops, and time-based exits — none of which appear in the simple ratio. Slippage shifts both stop and target unfavorably in fast markets. Funding fees on perpetuals add a continuous drag independent of price action. The breakeven win rate the calculator returns is theoretical; actual breakeven needs to include all friction. A strategy that's 1:3 on paper is closer to 1:2.5 after realistic execution costs.