Risk/Reward Ratio Calculator

The Breakeven Win Rate is calculated through the Risk to Reward Ratio, which measures how much your potential reward is, for every unit risk you take.

The Risk is the distance from the entry price to the stop loss and represents the risk you are willing to take on this trade, or in other words, the amount you are comfortable with losing. It can be expressed in pips (if you trade forex) or cents (if you trade shares or cryptocurrencies). The Reward is the distance from the entry price to the profit target. It is the potential profit that you expect from the position.

A 1:2 RR Ratio means that for every one currency unit risked, you expect to win two units. The same ratio can be expressed in different way.

2:4, 10:20, 120:240 – all of these are one and the same ratio.

Another way to use the calculator is to fill in the stop-loss and take-profit amounts. Just input them directly. For example, if your position holds $100 risk and $250 potential profit, the calculator will compute the Breakeven Win Rate, using these two amounts.

Calculations:

It is not enough to just have many winning trades. How much you win when you’re right and how much you lose when you’re wrong is essential for your success. This is exactly what the Breakeven Win Rate gives you. It is calculated through the following formula:

Breakeven Win rate = Risk Rate / (Risk Rate + Reward Rate)

So, if we have risk/reward ratio of 2:8

2 / (2 + 8) = 0.20 or 20 %

This result shows that 20 % of all trades need to be winners for the trading system to be profitable.

Risk/Reward & Breakeven Win Rate Calculator

The other way to get the Breakeven Win Rate is to input the price levels for the position. If you fill in the Entry price, Stop Loss and Take Profit, the calculator will compute the Risk/Reward Ratio, as well as the Breakeven Win Rate.

The difference between the Stop loss and the Entry price in absolute value forms the Risk, or how much you are prepared to lose with this position. The absolute value of the difference between the Entry price and the Take profit is the Reward, or that shows how much profit you expect from the position.

Calculations:

For example, if we have:

✓ Take Profit Price – 0.94193;
✓ Entry Price – 0.90021;
✓ Stop Loss Price – 0.88020.


The Risk/Reward Ratio is calculated by the following formula:

For long positions:
Risk/Reward Ratio = (Entry Price – Stop Loss Price) / (Take Profit Price – Entry Price)

For short positions:
Risk/Reward Ratio = (Stop Loss Price – Entry Price) / (Entry Price Take – Profit Price)

or in our example:

(0.90021 – 0.88020) / (0.94193 – 0.90021) = 0.02001 / 0.04172 which is 1 : 2.08 RR Ratio


The calculations for the Breakeven Win Rate are then: 1 / (1 + 2.08) = 0.32 or 32 %

This means that 32 % of the trades must be winners for the strategy to be profitable.