Enter where you plan to get in, where your stop sits and where you want to take profit. The calculator gives you the risk-reward ratio, the win rate you need just to break even with that ratio, and, if you add your own historical win rate, the average result you can expect per trade.
Risk-reward and break-even win rate
The ratio compares the distance to your target with the distance to your stop. Buy EUR/USD at 1.0850 with a stop at 1.0820 and a target at 1.0920, and you are risking 30 pips to make 70. That is a ratio of 1 : 2.33.
The break-even win rate follows directly from it. If a winning trade pays R times what a losing trade costs, you break even when you win 1 ÷ (1 + R) of the time.
| Risk-reward ratio | Break-even win rate |
|---|---|
| 1 : 0.5 | 66.7% |
| 1 : 1 | 50.0% |
| 1 : 1.5 | 40.0% |
| 1 : 2 | 33.3% |
| 1 : 3 | 25.0% |
Expectancy, measured in R
Traders often express results in units of risk, written as R. Losing a full stop is -1R, and hitting a target twice as far away is +2R. Expectancy is the average R per trade:
Expectancy = (win rate × R) – (loss rate × 1)
With a 40% win rate and a ratio of 1 : 2.33, that is 0.40 × 2.33 – 0.60 = +0.33R. Over 100 trades risking $100 each, the strategy would be expected to make about $3,300 before costs. Drop the win rate to 25% with the same ratio and expectancy turns negative.
Your win rate should come from your own trading records or a properly run backtest. A guess is not a win rate.
A bigger ratio is not automatically better
Pushing the target further away raises the ratio, but price reaches distant targets less often, so the win rate usually falls. A 1 : 5 setup that hits its target 10% of the time has an expectancy of 0.10 × 5 – 0.90 = -0.40R, which is worse than a modest 1 : 1.5 setup that wins half the time (+0.25R). The ratio and the win rate have to be judged together.
Long losing streaks are also part of the deal with low win rates. A strategy that wins 30% of the time will regularly produce runs of eight or ten losses in a row, and that is hard to sit through even when the expectancy is positive. Keeping the risk on each trade small, as covered in our position size calculator, is what lets you get to the end of a streak like that.
Costs come off the top
Spreads, commissions and slippage reduce every winner and enlarge every loser. On a short-term trade with a 10-pip stop, a 1-pip spread changes the real ratio noticeably. To include it, add the spread to your stop distance and subtract it from your target before you enter the prices.
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