Risk / reward.
R:R, break-even win rate and what you stand to win or lose — the numbers to compute before the order goes in.
Frequently Asked Questions
What is a good risk-reward ratio?
There is no universally good ratio. At 1:3, the cost-free break-even win rate is 25% only when every win earns exactly 3R and every loss costs exactly 1R. The same ratio can have positive or negative expectancy at different win probabilities. This tool does not estimate those probabilities or rate a strategy.
How do I calculate risk-reward ratio?
For a linear long, reward/risk = (target − entry) ÷ (entry − stop); for a short, reverse each difference. Stop and target must lie on opposite sides of entry. Inverse contracts use the ratio of settlement-coin payoffs from reciprocal prices, not just price distances. Select the correct contract and use consistent price and position units.
Should I always use the same R:R?
A fixed ratio is a planning choice, not evidence of profitability. Evaluate realized wins, losses, their frequencies and costs. Moving a stop or target changes the payout assumptions and may also change the chance of each outcome. A backtested or historical average does not guarantee the next trade's result.
What's the break-even win rate?
With fixed cost-free win and loss amounts, break-even win rate = 1 ÷ (1 + reward/risk). For 1:2 it is 33.33%; for 1:3 it is 25%. R:R and win rate must be read together. Hypothetically, 30% wins at 1:4 gives +0.50R per trade; 60% at 1:0.5 gives −0.10R. These are assumed distributions, not measured strategies or forecasts.
How does trading fees affect R:R?
Calculate each fill separately: fee = executed notional × the applicable rate. A total roundtrip rate of 0.1% on an assumed unchanged $10,000 notional is $10. If the rate is 0.1% on entry and another 0.1% on exit, the same-notional approximation is $20. Actual exit notional can differ; rebates, funding and execution prices also affect net results. This calculator excludes these costs.
What is expectancy and how does it relate to R:R?
Before costs, expectancy = (win rate × average win) − (loss rate × average loss). At an assumed 40% win rate with wins of 2R and losses of 1R, expectancy is 0.4 × 2R − 0.6 × 1R = +0.20R per trade. Subtract average net costs in the same units. This is a probability-weighted mean under the assumptions, not a promised profit or a guaranteed sequence of outcomes.
Is R:R more important than win rate?
Neither payout ratio nor win rate determines profitability alone. Under fixed cost-free assumptions, 80% wins at 1:0.2 gives −0.04R per trade, while 25% at 1:5 gives +0.50R. Changing the assumed win rate changes these conclusions. Real outcomes, costs and sample uncertainty must be assessed separately.
How do I improve my R:R ratio?
Choose entry, stop and target from an explicit scenario and test alternative fills. A closer stop or more distant target can raise the displayed ratio while reducing the chance of a profitable exit. The calculator cannot judge technical levels or predict whether a target will be reached. Compare the payoff with evidence about outcome frequencies, costs and available collateral.
What Is a Risk-Reward Ratio?
A planned risk-reward ratio compares the loss at an assumed stop fill with the profit at an assumed target fill. A 1:3 ratio means three units of potential profit for one unit of planned loss. It does not tell you how likely either exit is.
For a linear long, reward/risk = (target − entry) ÷ (entry − stop); for a short, reverse each difference. Stop and target must lie on opposite sides of entry. Inverse contracts use the ratio of settlement-coin payoffs from reciprocal prices, not just price distances. Select the correct contract and use consistent price and position units.
A stop is an order instruction, not a guaranteed fill price or loss cap. A stop-market order can slip; a stop-limit order may remain unfilled. Partial exits change the realized payout. Liquidation may occur before a planned exit, and its trigger can use a different reference price from the stop. Use actual fills when evaluating realized results.
Read Payout Ratios and Win Rates Together
The following comparison is hypothetical. It holds each loss at 1R and assumes the stated win amounts and frequencies, with no fees, funding or execution differences.
Across 100 trades under those assumptions:
Trader A wins 55% of the time at a 1:1 ratio: 55 winners × 1R − 45 losers × 1R = +10R.
Trader B wins 35% of the time at a 1:3 ratio: 35 winners × 3R − 65 losers × 1R = +40R.
The second assumed distribution produces four times the total in this example. That arithmetic does not show that a 1:3 setup has a 35% win probability, or that changing a target improves a real strategy.
0.55 × 1R − 0.45 × 1R = +0.10R; 0.35 × 3R − 0.65 × 1R = +0.40R.
How to Set Proper Stop-Loss and Take-Profit Levels
Choose entry, stop and target from an explicit scenario and test alternative fills. A closer stop or more distant target can raise the displayed ratio while reducing the chance of a profitable exit. The calculator cannot judge technical levels or predict whether a target will be reached. Compare the payoff with evidence about outcome frequencies, costs and available collateral.
A stop is an order instruction, not a guaranteed fill price or loss cap. A stop-market order can slip; a stop-limit order may remain unfilled. Partial exits change the realized payout. Liquidation may occur before a planned exit, and its trigger can use a different reference price from the stop. Use actual fills when evaluating realized results.
A fixed ratio is a planning choice, not evidence of profitability. Evaluate realized wins, losses, their frequencies and costs. Moving a stop or target changes the payout assumptions and may also change the chance of each outcome. A backtested or historical average does not guarantee the next trade's result.
Hypothetical Price Examples
Example 1: BTC Long with 1:2.5 R:R
Hypothetical linear BTC long, not a historical trade: entry $62,400, stop fill $60,900 and target fill $66,150. Planned loss per BTC = $1,500; planned profit = $3,750. Reward/risk = 3,750 ÷ 1,500 = 2.5, displayed as 1:2.5. Cost-free break-even win rate = 1 ÷ 3.5 ≈ 28.57%. The assumed fills are not guaranteed.
Example 2: ETH Short with ≈ 1:3.02 R:R
Hypothetical linear ETH short, not a historical trade: entry $1,780, stop fill $1,833 and target fill $1,620. Planned loss per ETH = $53; planned profit = $160. Reward/risk = 160 ÷ 53 ≈ 3.0189, displayed to two decimals as 1:3.02. Cost-free break-even win rate = 53 ÷ 213 ≈ 24.88%. The assumed fills are not guaranteed.
Common R:R Mistakes
A fixed ratio is a planning choice, not evidence of profitability. Evaluate realized wins, losses, their frequencies and costs. Moving a stop or target changes the payout assumptions and may also change the chance of each outcome. A backtested or historical average does not guarantee the next trade's result.
Choose entry, stop and target from an explicit scenario and test alternative fills. A closer stop or more distant target can raise the displayed ratio while reducing the chance of a profitable exit. The calculator cannot judge technical levels or predict whether a target will be reached. Compare the payoff with evidence about outcome frequencies, costs and available collateral.
A stop is an order instruction, not a guaranteed fill price or loss cap. A stop-market order can slip; a stop-limit order may remain unfilled. Partial exits change the realized payout. Liquidation may occur before a planned exit, and its trigger can use a different reference price from the stop. Use actual fills when evaluating realized results.
Calculate each fill separately: fee = executed notional × the applicable rate. A total roundtrip rate of 0.1% on an assumed unchanged $10,000 notional is $10. If the rate is 0.1% on entry and another 0.1% on exit, the same-notional approximation is $20. Actual exit notional can differ; rebates, funding and execution prices also affect net results. This calculator excludes these costs.
Related Tools & Guides
Risk Warning
Cryptocurrency prices are highly volatile and can change rapidly. The information on this site is provided for informational purposes only and does not constitute financial, investment, or trading advice.
Risk/reward calculations are estimates based on the values you enter. This tool does not account for slippage, funding rates, or fees. Not financial advice.