FameOrbitAn entry at 100, stop at 98 and target at 106 gives a 1:3 risk-reward ratio.
See your trade's risk-reward ratio.
Compare the distance to your stop-loss with the distance to your target before you place a trade. Fast, free and runs in your browser.
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Risk / reward calculator
Enter prices for a long or short setup.
RISK : REWARD RATIOStrong
1 : 3.00
Risk distance: 2.0000Reward distance: 6.0000
How risk-reward is calculated
The risk-reward ratio compares two price distances: the distance from your entry to your stop-loss (risk), and the distance from your entry to your profit target (reward).
Risk distance = |entry − stop-loss|
Reward distance = |target − entry|
Ratio = reward ÷ risk, expressed as 1 : R
What does a 1:2 ratio mean?
A 1:2 risk-reward ratio means your profit target is twice as far from entry as your stop-loss. For every unit of risk you take, you stand to gain two units if the trade reaches the target. The ratio describes the price distances you entered — it does not predict whether the trade will actually win.
Why risk-reward matters
A trader with a 1:2 minimum setup only needs to win 34% of trades to break even over time, because wins are twice as large as losses. Higher reward-to-risk ratios reduce the break-even win rate further. This is why many experienced traders treat the R:R ratio as a filter — they skip setups where the potential reward does not justify the risk taken.
Frequently asked questions
What is a good risk-reward ratio?
There is no universally correct answer. Many traders target at least 1:1.5 or 1:2. Higher ratios mean larger potential wins relative to risk, but they can also mean fewer setups qualify. The right ratio depends on your strategy and win rate.
Does a 1:3 ratio mean I always make three times my risk?
No. The ratio describes the distances you entered. In practice, slippage, early exits, and trades not reaching the target affect the actual result. This calculator models ideal price-distance arithmetic only.
How does this relate to position sizing?
Risk-reward tells you whether a setup is worth taking. Position sizing tells you how many units to trade given your account balance and risk tolerance. Use the Position Size Calculator after evaluating the risk-reward ratio.
Does it work for short trades?
Yes. The calculator uses absolute price distances, so it works for both long and short setups regardless of which way you are trading.