The Risk/Reward Calculator helps you determine if a trade has favorable odds before you enter. A good risk/reward ratio is essential for long-term profitability.

What You'll Need

Your account balance
Planned risk percentage (typically 1-2%)
Stop loss level in pips
Take profit target in pips

Step-by-Step Instructions

1Enter Account Details

Account Size: Your total trading capital
Risk %: How much you're risking (1-2% recommended)

Example:
Account Size: 10000
Risk %: 1

2Enter Stop Loss Distance

How many pips from your entry to your stop loss?

Example: Entering EUR/USD at 1.0850, stop at 1.0820 = 30 pips
Enter: 30

3Enter Take Profit Target

How many pips from your entry to your take profit?

Example: Target at 1.0910 (60 pips above entry)
Enter: 60

4Review Results

The calculator shows:

Risk/Reward Ratio: e.g., "1:2" (risk $1 to make $2)
Risk Amount: Dollar amount at risk ($100)
Reward Amount: Potential profit ($200)
Recommended Action: Take trade or skip

Understanding Risk/Reward Ratios

Good Ratios (Take the Trade)

1:2 - Risk $100 to make $200 (minimum recommended)
1:3 - Risk $100 to make $300 (excellent)
1:4+ - Risk $100 to make $400+ (exceptional)

Poor Ratios (Skip the Trade)

1:1 - Risk $100 to make $100 (break-even at best)
2:1 - Risk $100 to make $50 (terrible, avoid!)

💡 Rule of Thumb: Never take a trade with less than 1:1.5 risk/reward. Ideally, aim for 1:2 or better.

Real Trading Example

Setup: GBP/USD Long

Plan:
• Entry: 1.2650
• Stop Loss: 1.2620 (30 pips below)
• Take Profit: 1.2740 (90 pips above)
• Account: $5,000
• Risk: 2% ($100)

Calculator Input:
Account Size: 5000
Risk %: 2
Stop Loss: 30 pips
Take Profit: 90 pips

Result:
Risk/Reward: 1:3 ✅
Risk: $100
Reward: $300
Verdict: Excellent trade! Take it.

Common Mistakes

❌ Mistake #1: Forcing a Trade with Poor R:R

Natural resistance is only 20 pips away but support is 50 pips below. That's a 2.5:1 ratio (risk $250 to make $100). Skip it!

❌ Mistake #2: Moving Targets to Get Better Ratio

Don't set unrealistic targets just to make the ratio look good. Use actual support/resistance levels.

❌ Mistake #3: Ignoring the Ratio After Entry

If your original plan was 1:2 (30 pip stop, 60 pip target), don't take profit early at 30 pips. You just turned 1:2 into 1:1.

Pro Tips

💡 Tip #1: With a 1:2 R:R, you only need a 33% win rate to profit. With 1:3, you only need 25%!

💡 Tip #2: Calculate R:R BEFORE entering the trade, not after. It's a decision-making tool, not a justification tool.

💡 Tip #3: If you can't find a 1:2 setup, don't trade. Patience is profitable.

FAQ

Q: What if my R:R is exactly 1:1?

A: Skip it. After spreads and commissions, you'll barely break even. Hold out for 1:1.5 minimum.

Q: Can I use this for multiple take profit levels?

A: Use your final TP level. Or calculate each level separately if you're scaling out.

Q: Does this work for all markets?

A: Yes! R:R ratios apply to forex, stocks, crypto, commodities—any traded instrument.

Open Risk/Reward Calculator →

Related: Complete R:R Guide | All Calculators