Risk:Reward Calculator
Score a trade setup before you take it. See the exact ratio between what you stand to make and what you stand to lose, the win rate your strategy needs just to break even, and how expectancy changes across every possible win rate.
Expectancy = (win rate × reward) − (loss rate × risk). A favorable R:R ratio alone doesn't make a strategy profitable — it needs to clear the breakeven win rate shown above with margin. This chart shows your expected outcome per trade at every possible win rate, given your current risk and reward amounts.
Why risk:reward matters before position sizing
Reward distance ÷ risk distance
R:R compares how far your target is from entry against how far your stop is from entry. A 1:3 ratio means you stand to make ₹3 for every ₹1 you risk — independent of position size or account currency.
The floor, not the goal
Breakeven win rate = 1 ÷ (1 + R:R). At 1:3 you need just 25% of trades to win to avoid losing money — but clearing that floor with real margin is what separates a strategy from gambling.
Expectancy needs both numbers
A 1:3 setup with a 15% real win rate still loses money. Combine this tool's ratio with your own tracked win rate to see true expectancy, not just a ratio that looks good on paper.
What is a risk:reward ratio?
The risk:reward ratio (R:R) compares how much you stand to lose on a trade if it goes wrong against how much you stand to gain if it goes right. It's expressed as a ratio like 1:2 or 1:3, read as "risking 1 unit to make 2 (or 3) units." A trader who risks ₹1,000 to potentially make ₹3,000 has a 1:3 setup — the most basic, and arguably most important, number in trade planning, because it's known before you enter, unlike the outcome itself.
Risk:reward is calculated purely from price levels — your entry, your stop-loss, and your target — and has nothing to do with position size, account currency, or how confident you feel about the trade. A 1:3 setup is a 1:3 setup whether you're risking ₹100 or ₹1,00,000.
How risk:reward actually protects you
The single biggest misconception about risk:reward is that a "good" ratio (say, 1:3 or better) makes a trade safe. It doesn't. What it does is change the maths of being wrong often.
Consider two traders. Trader A takes 1:1 setups and wins 50% of the time — over 100 trades, they roughly break even before costs. Trader B takes 1:3 setups and only wins 30% of the time — a much worse win rate — yet ends up profitable, because each win is worth three times each loss. Risk:reward is the lever that lets a trader be wrong most of the time and still come out ahead, provided the ratio and the win rate are evaluated together, never separately.
A favourable R:R ratio doesn't reduce how often you'll be wrong. It reduces how much being wrong costs you, relative to how much being right pays you.
The risk:reward formula, explained
This calculator computes R:R directly from your entry, stop-loss, and target prices:
R:R = Reward per unit ÷ Risk per unit
- Risk per unit — the distance between your entry price and your stop-loss. For a long trade, this is Entry − Stop (the stop sits below entry). For a short trade, it's Stop − Entry (the stop sits above entry).
- Reward per unit — the distance between your entry price and your target. For a long trade, Target − Entry. For a short trade, Entry − Target.
- Breakeven win rate — derived from the ratio itself: 1 ÷ (1 + R:R), expressed as a percentage. This calculator computes it automatically alongside the ratio.
The calculator handles long and short trades with the correct sign conventions automatically — you only need to enter prices, not work out which side of entry your stop and target should fall on.
A worked example, step by step
Suppose you're long a stock at ₹165, with a stop-loss at ₹160 and a target at ₹180.
| Step | Value |
|---|---|
| Risk per unit (165 − 160) | ₹5 |
| Reward per unit (180 − 165) | ₹15 |
| Risk:Reward ratio (15 ÷ 5) | 1 : 3 |
| Breakeven win rate (1 ÷ (1+3)) | 25% |
This setup needs to win only 1 out of every 4 attempts to break even, before costs. Anything better than a 25% win rate on repeated 1:3 setups like this one is, mathematically, a profitable strategy — at least in theory, before brokerage, slippage and taxes are factored in.
Switch the direction toggle to "Short" and enter a stop above entry and a target below — the calculator will compute the same 1:3-style ratio correctly for a short trade, without you needing to flip any signs manually.
Breakeven win rate: the floor, not the goal
Breakeven win rate is the minimum percentage of trades you need to win, at a given R:R ratio, to avoid losing money over many repetitions — not the win rate you should be aiming for. Treating the breakeven figure as a target is a subtle but common mistake: a strategy that wins exactly 25% of its 1:3 setups makes, on average, ₹0 per trade before costs. Once brokerage, slippage, and taxes are added back in, a strategy sitting exactly at its theoretical breakeven point is actually losing money in practice.
A reasonable margin of safety — aiming for an actual win rate comfortably above the breakeven threshold, not just above it — is what separates a strategy that survives real-world frictions from one that looks fine on paper and bleeds slowly in a live account.
Why a good ratio alone isn't enough
R:R and win rate are not independent numbers you can evaluate one at a time — they only mean something together, through expectancy:
Expectancy = (Win Rate × Reward) − (Loss Rate × Risk)
A 1:5 setup sounds excellent until you learn the strategy behind it only wins 10% of the time — its breakeven win rate is 16.7%, so at 10% it's a clear loser despite the attractive-looking ratio. Conversely, a humble 1:1 setup with a genuine 65% win rate is comfortably profitable. The ratio by itself tells you nothing about whether a strategy makes money; it only tells you what win rate the strategy needs to clear. This calculator's expectancy chart plots exactly this relationship across every possible win rate, so you can see at a glance where your actual, tracked win rate needs to land.
Common risk:reward mistakes to avoid
- Picking a target to hit a "nice" ratio. Setting a target at exactly 3× your risk distance because "1:3 looks good" — rather than because there's a real technical level (resistance, a prior swing high, a measured move) there — produces a target with no actual reason to be reached.
- Using an unrealistic stop just to inflate the ratio. Moving your stop closer to entry to make the ratio look better increases how often you'll be stopped out by normal noise, which lowers your real win rate and can easily erase the apparent improvement.
- Ignoring your own tracked win rate entirely. A ratio without a corresponding, honestly tracked win rate is half an equation. Keep a trading journal; without one, "is my strategy profitable" is a guess, not an answer.
- Forgetting costs change the real breakeven. Brokerage, STT, exchange charges, and slippage all eat into reward and add to effective risk. The theoretical breakeven win rate shown here is always a touch optimistic versus your real, cost-inclusive breakeven.
How to use this calculator
- Choose Long or Short to match your trade direction.
- Enter your entry price, stop-loss, and target price.
- Optionally enter a quantity to see risk and reward in rupee terms, not just per-unit.
- Read the ratio and breakeven win rate, then check the expectancy chart against your own real, tracked win rate.
- Once you're happy with the setup, use the Position Size Calculator to work out exactly how many shares or lots to trade given your account size and risk tolerance.
Frequently asked questions
Not by itself. A 1:3 ratio needs only a 25% win rate to break even, versus 50% for a 1:1 ratio — so 1:3 gives you more room for error. But if your actual, tracked win rate on 1:3-style setups is only 15%, the 1:3 ratio still loses money. The ratio and your real win rate must always be evaluated together through expectancy, never the ratio alone.
Most professional traders aim for a minimum of 1:1.5 to 1:2 on individual setups, with many systematically targeting 1:3 or better where the chart genuinely supports it. There's no universally "correct" ratio — what matters is that your real, tracked win rate clears the breakeven threshold that your typical ratio implies, with a reasonable margin for costs.
No. The ratio and breakeven win rate shown are theoretical, based purely on the entry, stop, and target prices you enter. Brokerage, STT, exchange charges, and slippage all add real cost on top, which raises your true breakeven win rate above the figure shown here. Use the Accelpix Brokerage Calculator alongside this tool to see your exact, cost-inclusive breakeven.
Risk:reward is a property of a single trade setup, known before you enter, derived purely from price levels. Win rate is a property of a strategy repeated many times, only knowable in hindsight from real trade history. Neither one alone tells you if a strategy is profitable — you need both, combined through the expectancy formula, to know that.
Yes. Toggle to "Short" and enter your entry, stop-loss (above entry), and target (below entry) — the calculator automatically applies the correct sign convention for a short position so the ratio comes out positive and correctly calculated, the same way it does for a long trade.
Either don't take it, or look for the same trade with a better risk:reward profile — a tighter, more logical stop, or a more realistic target based on an actual resistance/support level rather than an arbitrary multiple of your risk. A setup below your tracked win rate's breakeven is, by definition, a net negative-expectancy trade before you even consider costs.