Risk Reward Ratio Calculator

Free stop loss and take profit calculator — analyze R:R ratio, break-even win rate, and visualize your trade levels

Calculate Risk-Reward Ratio

Auto-calculates
How to use this calculator:
1 Enter your Entry Price (the price you'll buy/sell at)
2 Set your Stop Loss (exit price if trade goes wrong)
3 Set your Take Profit target(s) — results update instantly!
Long: You profit when price goes UP. Stop Loss should be below entry, Take Profit above.
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$
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1:3.00
shares
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Risk-Reward Ratio

1:3.00

Excellent

5.00%
Risk
15.00%
Reward

Trade Statistics

25.00%
Break-even Win Rate
1:3.00
Weighted R:R
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Risk ($)
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Reward ($)

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Risk Reward Ratio Calculator: Your Stop Loss Take Profit Planning Tool

The risk-reward ratio (R:R) is arguably the most important metric in trading. This stop loss take profit calculator helps you compare the potential profit of a trade to its potential loss, making it easy to decide whether a trade setup is worth taking. Understanding R:R is essential for long-term trading success—it's not about winning every trade, but about ensuring your winners are larger than your losers.

How to Set Stop Loss and Take Profit Levels

For Long Positions:

R:R Ratio = (Take Profit - Entry) / (Entry - Stop Loss)

For Short Positions:

R:R Ratio = (Entry - Take Profit) / (Stop Loss - Entry)

Risk-Reward vs. Win Rate: The Critical Relationship

Many traders obsess over win rate, but R:R is equally (if not more) important. A trader with 30% win rate can be more profitable than one with 60% win rate if their R:R is high enough.

R:R Ratio Break-even Win Rate Quality Profit at 50% Win Rate
1:0.5 67% Poor -$25 per $100 risked
1:1 50% Minimum $0 (break-even)
1:2 33% Good +$50 per $100 risked
1:3 25% Excellent +$100 per $100 risked
1:5 17% Outstanding +$200 per $100 risked

The Power of Multiple Take Profit Targets

Scaling out of positions using multiple take profit levels is a strategy used by professional traders to lock in profits while letting winners run.

Benefits

  • Locks in partial profits early
  • Reduces emotional pressure
  • Lets remaining position run
  • Improves consistency

Example Strategy

  • TP1 (50%): 1:1.5 R:R - secure profit
  • TP2 (30%): 1:2.5 R:R - solid gain
  • TP3 (20%): 1:4+ R:R - let it run

Common Mistakes to Avoid

❌ Moving Stop Loss

Never move your stop loss further away to avoid getting stopped out. This destroys your R:R calculation.

❌ Taking Quick Profits

Cutting winners short while letting losers run ruins your effective R:R ratio over time.

Pro Tip: Combine favorable R:R setups with AI-powered predictions from SharePreds to identify high-probability entries that are worth risking your capital on.

Frequently Asked Questions

For day trading, a minimum 1:2 risk-reward ratio is recommended by most professionals. This means risking $1 to potentially make $2. With a 1:2 R:R, you only need to win 33% of your trades to break even. Many successful day traders aim for 1:3 or higher, allowing profitability even with a 30-40% win rate. The exact ratio depends on your strategy's win rate—higher win rate strategies can work with lower R:R.

For a long stock position: R:R Ratio = (Take Profit - Entry Price) / (Entry Price - Stop Loss). For example, buying at $100 with a stop loss at $95 and take profit at $115: R:R = ($115 - $100) / ($100 - $95) = $15 / $5 = 3. This is a 1:3 risk-reward ratio, meaning you're risking $5 to potentially make $15.

The 1:3 risk-reward rule means you target 3 times more profit than what you're risking. If your stop loss is $10 away from entry, your take profit should be $30 away. This allows you to be profitable with just a 25% win rate, providing significant margin for error. The 1:3 rule is popular because it creates a sustainable trading edge even with modest prediction accuracy.

Yes, professional traders almost universally use stop losses. A stop loss limits your maximum loss on any trade, protecting your capital from catastrophic drawdowns. Without a stop loss, a single bad trade can wipe out months of gains. The R:R ratio calculation requires a defined stop loss to work—you cannot calculate your risk without knowing where you'll exit if wrong.

Absolutely. Many successful traders have win rates below 50%. The key is having a high risk-reward ratio. With a 1:3 R:R, you only need to win 25% of trades to break even. With a 1:5 R:R, you only need 17% wins. Trend-following strategies often have 30-40% win rates but are highly profitable because their winners are much larger than their losers.

Risk-reward ratio and position sizing work together but serve different purposes. R:R tells you the quality of the trade setup—whether the potential reward justifies the risk. Position sizing determines how many shares to buy based on your account size and risk tolerance. First use R:R to filter for good setups (minimum 1:2), then use position sizing to determine trade size. Check our Position Size Calculator for sizing calculations.

Expected value (EV) is the average profit or loss you can expect per trade over the long run. Formula: EV = (Win Rate × Average Win) - (Loss Rate × Average Loss). A positive EV means your trading system should be profitable over many trades. For example, with 40% win rate, $300 average win, and $100 average loss: EV = (0.4 × $300) - (0.6 × $100) = $120 - $60 = +$60 per trade.
Related Tool: Position Size Calculator

Calculate optimal position size based on your risk tolerance and account size.

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Disclaimer: This calculator is for educational purposes only. Risk-reward calculations depend on accurate stop loss and take profit placement. Past performance doesn't guarantee future results. Always conduct your own analysis and consider your risk tolerance before trading.

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