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Risk reward calculator
Your reward to risk from the entry, stop and targets, the win rate you need to break even once costs are counted, and what your own win rate means over many trades.
We do not give financial advice, and we make no promises about returns. This calculator only does the arithmetic on the figures you enter. Read the full notice.
Targets
Spread and commission for opening and closing, in the same units as the prices: for example 0.0002 for a 2-pip spread on EUR/USD, or 0.05 for 5p on a share priced in pounds.
Your figures (optional)
From your own trading records or testing.
| Risk : reward | Win rate to break even |
|---|---|
| 1 : 0.5 | 66.67% |
| 1 : 1 | 50.00% |
| 1 : 1.5 | 40.00% |
| 1 : 2 | 33.33% |
| 1 : 2.5 | 28.57% |
| 1 : 3 | 25.00% |
| 1 : 4 | 20.00% |
| 1 : 5 | 16.67% |
| Account down by | Gain needed to get back |
|---|---|
| 5% | 5.26% |
| 10% | 11.11% |
| 20% | 25.00% |
| 25% | 33.33% |
| 30% | 42.86% |
| 40% | 66.67% |
| 50% | 100.00% |
| 75% | 300.00% |
A stop does not always fill at your price, and a target may never be reached, so real results spread around these figures. Nothing you type is stored or sent anywhere.
How it works
- Risk = distance from entry to stop + costs; reward = distance from entry to target − costs (weighted across partial exits)
- Reward to risk = reward ÷ risk
- Break-even win rate = risk ÷ (risk + reward) = 1 ÷ (1 + reward to risk)
- Lowest reward to risk for a win rate = (1 − win rate) ÷ win rate
- Expectancy = win rate × reward to risk − (1 − win rate), in multiples of the amount risked
- Gain needed to recover a loss = loss ÷ (1 − loss)
Long or short is worked out from where the stop sits: below the entry for a long trade, above it for a short one. The losing-run figures are exact probabilities for independent trades at your win rate, worked out step by step rather than by simulation.
Questions
What is the reward to risk ratio?
How far the price can move in your favour to your target, compared with how far it can move against you to your stop. Entry 100, stop 95 and target 115 risk 5 to make 15: a reward to risk of 3, often written 1:3.
What is a break-even win rate?
The share of trades you need to win just to come out level. It is risk ÷ (risk + reward), so 1 ÷ (1 + reward to risk). At a reward to risk of 2 you break even winning one trade in three, 33.33%. Anything above that rate makes money on average; anything below loses it.
Why include costs?
Spread and commission make every loss a little bigger and every win a little smaller. On short-term trades with tight stops that can move the break-even win rate a long way. Enter your round-trip cost in the same units as the prices.
How do partial exits work?
Add up to three targets and the share of the position you close at each. The reward is the weighted average of the three distances, so closing half at 1:1 and half at 1:3 gives a reward to risk of 2. The shares must add up to 100%.
What is expectancy?
The average result per trade, in multiples of the amount you risk (R), from your win rate and reward to risk: win rate × reward − loss rate × 1. With a 40% win rate at 1:2 it is 0.4 × 2 − 0.6 = +0.2R, or £20 a trade when you risk £100. It assumes every trade hits either the stop or the target.
What are the losing runs?
Even a strategy with an edge has streaks of losses. From your win rate, the calculator works out the longest losing run to expect over a number of trades, and the chance of at least one run of 5, 8 and 10 losses in a row. It treats each trade as independent of the last, which real trades may not be.
Does this calculator tell me what to trade?
No. It does arithmetic on the figures you enter. It does not recommend trades, give signals or judge whether a strategy is sound.
What this is, and what it is not
This calculator carries out the arithmetic on the figures you enter. It does not choose trades, give signals or recommend any investment, and its output is not advice. BrightDragon Systems Ltd is not authorised or regulated by the Financial Conduct Authority and does not provide regulated financial services.
Trading carries risk and you can lose money. Leveraged products such as CFDs and spread bets can lose you more than you expect, quickly. Check every figure against your own platform before you trade.
More free tools for traders & investors: all of them in one place. Coming soon: the position sizing and risk workbook.
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