Risk & Money Management
Risk/Reward & Expectancy Calculator
Find your reward-to-risk ratio and the win rate needed to break even from entry, stop and target — plus an expectancy calculator for win %, average win and loss.
The risk/reward ratio is a trade's potential profit (entry to target) divided by its potential loss (entry to stop).
Reward-to-risk ratio
3 : 1
- Reward
- $15.00
- Risk
- $5.00
- Breakeven win rate
- 25%
Expectancy per trade
$80.00
- In R multiples
- 0.80R
- Loss rate
- 55%
Worked example
A trader buys at 100 with a stop at 95 and a target at 115.
- Risk
- 100 − 95 = 5
- Reward
- 115 − 100 = 15
- Risk/reward ratio
- 15 ÷ 5 = 3.0 (3:1)
- Breakeven win rate
- 1 ÷ (1 + 3) = 25%
- Expectancy (40% win rate, $300 avg win, $100 avg loss)
- (0.40 × $300) − (0.60 × $100) = +$60 per trade
At 3:1 the trader only needs to win 1 in 4 trades (25%) to break even. With a 40% win rate, expectancy is +$60 per trade (+0.6R) — a real edge despite losing more often than winning.
How this is calculated
The reward-to-risk ratio compares your potential profit to your potential loss:
R:R = (target − entry) ÷ (entry − stop) for a long.breakeven win rate = 1 ÷ (1 + R:R)
Expectancy is the long-run average result per trade: (win% × avgWin) − (loss% × avgLoss). A positive expectancy means a statistical edge; the R-multiple version divides by your average loss to express it in units of risk.
When to use this calculator
Use this at the planning stage, before entry, when you have a candidate entry, stop and target. It tells you whether the trade's structure makes sense: a 3:1 setup only needs to win 25% of the time to break even, while a 1:1 setup needs better than 50%.
It is also the right tool for auditing a strategy after the fact. Feed in your actual win rate, average win and average loss, and the expectancy figure shows whether the system has a real statistical edge per trade — or is quietly losing money despite frequent wins.
Skip it for trades without a defined target, such as open-ended trend-following exits; the ratio needs a fixed reward leg to mean anything. In those cases expectancy from historical results is the more honest measure.
Common mistakes
- Moving the target after entry to force a better-looking ratio, rather than setting it from the original trade thesis.
- Comparing R:R across trades with different stop distances as if they represented the same risk.
- Treating a positive R:R alone as an edge — a 3:1 setup with a 15% win rate still loses money.
Frequently asked questions
- What is a good risk/reward ratio?
- A ratio of 2:1 or higher is common, meaning the target is at least twice the distance of the stop. Higher R:R lets you be profitable with a lower win rate.
- What is breakeven win rate?
- It is the win percentage at which a strategy neither makes nor loses money for a given R:R. It equals 1 ÷ (1 + R:R).
- What is expectancy?
- Expectancy is the average profit or loss per trade: (win % × average win) − (loss % × average loss). A positive number means a statistical edge.
- Can I have a good R:R but still lose money?
- Yes — a high R:R with a win rate far below the breakeven win rate still produces negative expectancy over time.
- Does risk/reward include fees and slippage?
- No, this tool uses raw entry/stop/target prices. Subtract expected fees from the reward side for a more realistic ratio.
- How does risk/reward differ from win rate?
- R:R measures the size of a win versus a loss; win rate measures how often you win. Expectancy needs both together.
- What R:R do professional traders target?
- There is no universal number — it depends on strategy and win rate. Many systematic strategies target 1.5:1–3:1 with a win rate that keeps expectancy positive.