Risk/reward calculator.
Enter your entry, stop-loss and take-profit to get the risk to reward ratio, the win rate you need to break even, and the expectancy of the trade. Instant and free.
ZENKEI
ZENKEI
Enter your entry, stop-loss and take-profit to get the risk to reward ratio, the win rate you need to break even, and the expectancy of the trade. Instant and free.
Risk and reward are shown as price distance. Expectancy is the average result per trade in units of risk (R), using your win rate.
The risk/reward ratio compares what you can lose on a trade with what you can gain. Risk is the distance from your entry to your stop-loss; reward is the distance from your entry to your take-profit. A ratio of 1 to 2 means the reward is twice the risk.
Enter long at 1.1000 with a stop at 1.0950 and a target at 1.1100. The risk is 0.0050 (50 pips) and the reward is 0.0100 (100 pips), so the risk/reward ratio is 1 to 2. With that ratio you only need to win about 33% of trades to break even. Win half of them and the expectancy is +0.5 R: on average you make half your risk per trade.
A better ratio lets you be right less often and still make money. The breakeven win rate is 1 divided by 1 plus the ratio, and expectancy ties it to how often you actually win:
The catch: the ratio has to be realistic. A 1 to 5 target that price rarely reaches is worse than a 1 to 2 that fills. Test it honestly, which is exactly what backtesting a strategy is for.
A fixed risk/reward, sized from your stop, is textbook logic for an Expert Advisor. We build custom EAs that set stops, targets and position size automatically. Start with strategy to Expert Advisor conversion, or size the trade with our position size calculator.
This calculator is provided for educational purposes only and is not financial or investment advice. Backtest and forward-test any approach before risking capital.
The risk/reward ratio compares how much you stand to lose on a trade with how much you stand to gain. It is the distance from entry to take-profit divided by the distance from entry to stop-loss. A ratio of 1 to 2 means the potential reward is twice the risk.
Risk is the distance from your entry price to your stop-loss. Reward is the distance from your entry price to your take-profit. Divide reward by risk to get the ratio. For example, risking 50 pips to make 100 pips is a risk/reward ratio of 1 to 2.
Many traders look for at least 1 to 2, meaning the reward is at least twice the risk. A higher ratio means you can be right less often and still be profitable, but it must be realistic for the strategy and market, not just a number on paper.
The breakeven win rate is one divided by one plus the risk/reward ratio. At 1 to 1 you need to win about 50 percent of trades to break even; at 1 to 2 you need about 33 percent; at 1 to 3 about 25 percent. Anything above that turns a profit before costs.
Expectancy is the average result of a trade in units of risk, given your win rate and risk/reward ratio. It equals win rate times the ratio minus the loss rate. A positive expectancy means the strategy makes money on average over many trades.
We turn strategies into Expert Advisors with stops, targets and sizing built in, source code included.