Risk/Reward Ratio Calculator
Compute risk/reward ratio from entry, stop-loss, and take-profit prices. Get break-even win rate, position size, and max loss based on account size and risk percentage.
Risk/Reward Ratio Calculator
How to use the Risk/Reward Ratio Calculator
Set direction + the three prices
Pick LONG (you expect price to go up) or SHORT (you expect price to go down). Enter your entry price (where you'll open the trade), stop-loss price (where you'll exit at a loss if wrong), and take-profit price (where you'll exit at a profit if right). For long trades: stop must be BELOW entry and target ABOVE entry. For short trades: target BELOW entry and stop ABOVE entry. These three numbers fully define the trade's risk/reward profile.
Read the risk/reward ratio
"1 : 3" means risking $1 to potentially make $3. Higher is better. 1:1 = breakeven trade, needs 50%+ win rate. 1:2 = needs 33% win rate to break even — most beginner-friendly setup. 1:3 = needs 25% win rate. 1:5+ = trend-following / breakout setups. The break-even win rate is the math: if your R:R is 1:2, you need to win at least 33% of trades to be profitable. Track your actual historical win rate to know if your R:R is sustainable.
Use position sizing — never skip this
Set your account size and the % you're willing to risk per trade (1-2% is the rule of thumb most trading texts teach). The calculator computes: max dollar loss, position size in dollars, and number of shares. Example: $10,000 account with 1% risk = max $100 loss per trade. If stop is $5 away from entry, max position = $100/$5 = 20 shares (worth $2000 at $100 entry). This sizing ensures no single trade can blow up your account.
Apply this before every trade
The discipline of pre-trade R:R calculation separates serious traders from gamblers. Use this calculator BEFORE entering any trade — never compute it after. If the R:R doesn't justify the risk (below 1:1.5 for most setups), skip the trade — most candidate setups fail this filter. The hardest part of trading isn't finding setups — it's having the discipline to wait for ones with proper R:R.
Risk/reward — the math that separates traders from gamblers
The risk/reward ratio is the single most important pre-trade discipline in active trading. It quantifies, before you enter, what you stand to lose vs gain. The math is simple: distance from entry to stop = risk; distance from entry to target = reward; reward divided by risk = R:R. A 1:3 R:R means you can be wrong 75% of the time and still break even — the math allows for high error rates as long as the few wins are big enough. Conversely, a 1:0.5 R:R means you need to win 67% of trades just to avoid losing money — a punishingly high bar that virtually nobody sustains over time. The discipline of skipping trades that don't offer proper R:R is what separates traders from gamblers.
The expectancy formula — why R:R combines with win rate
Expectancy = (Win Rate × Average Win) − (Loss Rate × Average Loss). For a strategy to be profitable, expectancy must be positive. Two ways to achieve this: high win rate with small wins (most professional discretionary traders), or low win rate with big wins (trend-followers, breakout traders). Both work; both require the math to line up. The calculator's "break-even win rate" tells you the minimum hit rate needed for your specific R:R: 50% for 1:1 R:R, 33% for 1:2, 25% for 1:3, 20% for 1:4. Track your real win rate over 50+ trades; if you're below your break-even threshold, the strategy is losing money mathematically regardless of how it feels.
Risk/reward is the entry ticket; win rate is the actual experience. Don't take any trade where R:R requires a higher win rate than you've historically achieved. The math doesn't care about your conviction.
Position sizing — the multiplier you can't ignore
Even a winning strategy goes broke with bad position sizing. Risking 10% of your account on each trade means a 5-loss streak (more likely than not somewhere in 50 trades at a 50% win rate) takes you down 41% — a devastating drawdown to recover from. Risking 1% means the same streak only costs 5% — easily recovered. The Kelly Criterion (Kelly, 1956) gives the growth-optimal sizing f* = (bp − q) / b, where b = R:R, p = win rate, q = 1−p — but it's brutal: at 1:2 and a 50% win rate, full Kelly says risk 25% per trade. Practitioners use "fractional Kelly" (¼ or ⅓ Kelly) because estimation error in the win rate turns full Kelly into ruin; for typical strategies that lands in the low single digits per trade. The 1-2% rule encoded in this calculator is the conservative version of that.
The ASEAN trader's angle
Active trading across ASEAN has been democratised by zero-commission brokers (Tiger Brokers, Webull, Moomoo, Saxo Markets, Interactive Brokers, Phillip Securities). Singapore: the most developed retail trading scene, with strong forex (regulated by MAS) + crypto + equities pools. Malaysia / Indonesia / Philippines / Vietnam / Thailand: rapidly growing retail trading via mobile apps; meme-coin + meme-stock waves have hit the region. Regulatory considerations: MAS sets margin requirements for retail customers trading CFDs and spot FX for leveraged foreign exchange trading, under the Securities and Futures Act — the Margin Requirements for Exempt Financial Institutions Regulations 2018 and the Financial and Margin Requirements for CMS Licence Holders Regulations. Check the current figure with your broker, whose required margin is what actually binds your position size. Regulators across ASEAN have tightened CFD marketing since 2020. Tax treatment: Singapore has no capital-gains tax for individuals, though habitual trading can be assessed as trading income; Malaysia and Indonesia may treat frequent trading as business income. The math in this calculator is universal — R:R discipline works identically regardless of regulatory regime. The chatter in trading communities skews toward "win rate" psychology over R:R discipline; mathematical discipline beats narrative conviction.
SGX mechanics that quietly rewrite your R:R
The ratio this calculator returns is a gross one, and on SGX two local mechanics can turn a good gross ratio into a losing net one. Board lots are 100 shares (cut from 1,000 in January 2015), so your position size is quantised — you round to the nearest 100 and your realised risk lands slightly above or below the 1% you planned, which is why the sizing figure above should be treated as a target rather than an order. The bigger one is the minimum-commission floor most Singapore brokers apply: it is charged per side regardless of trade size, so on a small position it behaves as a fixed cost on both the win and the loss, widening the loss and shrinking the win at the same time.
Worked example — 300 shares at S$2.00 (3 board lots, S$600 exposure), stop at S$1.90, target at S$2.20. Gross, that is S$30 of risk against S$60 of reward: a clean 2:1. Assume a S$10 minimum commission each way, so S$20 round trip. Stopped out you lose S$30 + S$20 = S$50; at target you make S$60 − S$20 = S$40. Your real ratio is 0.8:1 — the trade you sized as a 2:1 is now paying you less than it risks, before you have been wrong even once. The floor varies by broker, so substitute your own; the point is that it does not scale with position size, so it hurts small positions hardest. Two defences: trade a size where the floor is a rounding error rather than a factor, or add the round-trip cost to your stop distance before computing the ratio at all.
Break-even win rate is 1 ÷ (1 + R), and Kelly says size smaller than you think
R:R = (target − entry) / (entry − stop). The mathematical core of every trade decision. Compute BEFORE entering, never after.
A 1:2 R:R needs only a 33% win rate to break even. Most retail traders chase 1:1 with 70% win rates — far harder.
The 1-2% rule: never risk more than 1-2% of your account on any single trade — the conservative fraction of Kelly that most trading texts teach.
The Kelly Criterion (J. L. Kelly, Bell System Technical Journal, 1956) gives the growth-optimal fraction f* = (bp − q) / b. Full Kelly is too aggressive in practice; use ¼ or ⅓ Kelly.
A 1:1 setup at a 50% win rate has zero expectancy before costs — after spread and commission it loses. The hardest part isn't finding trades — it's having patience for good ones.
The expectancy formula: E = (Win% × Avg Win) − (Loss% × Avg Loss). Must be positive for the strategy to make money long-term.
A 5-loss streak is more likely than not somewhere in 50 trades at a 50% win rate. Position sizing ensures it doesn't destroy the account.
Trend-following strategies often have 30-40% win rates with 1:3 to 1:5 R:R — mathematically profitable despite "losing more often than winning."
Risking 10% per trade means a 5-loss streak costs 41% of the account. Risking 1% means the same streak costs only 5%. Position size compounds dramatically.
Singapore has no capital-gains tax for individuals, but IRAS can assess habitual, frequent trading as taxable trading income — the line is facts-and-circumstances.
Frequently Asked Questions
-
Depends on your strategy and historical win rate. Universal benchmarks: 1:1 = bad, requires 50%+ win rate. 1:2 = standard, needs 33% win rate — most achievable for retail. 1:3 = strong, needs 25% win rate. 1:5+ = trend-following territory, allows for very low hit rates. Match your R:R to your real win rate. If your historical win rate is 40%, target 1:2+ R:R; if it's 30%, target 1:3+. Don't fool yourself about win rate — track 50+ real trades to get an honest number.
-
Three common approaches. Volatility-based: place stop at 1-3× ATR (Average True Range) — adjusts to instrument's normal noise. Structure-based: place stop beyond a recent swing low (for longs) or swing high (for shorts) — protects against the move you're trading reversing. Percentage-based: fixed % away (e.g. 5% for swing trades) — simple but ignores instrument volatility. Most pros use volatility OR structure; pure percentage stops are too simplistic. The stop should be where, if hit, your trade thesis is invalidated.
-
Targets are harder than stops because reward is uncertain. Common approaches: Fixed R:R multiple: target = entry + 2× (entry − stop). Simple and consistent. Structure-based: target the next major resistance (long) or support (short). Volatility-based: target = entry + N × ATR. Scaled-out: take profit on 50% at 1:1, 50% at 1:3 (banks gains, lets winners run). For beginners, fixed R:R (target = 2-3× stop distance) is simplest and most consistent. As experience grows, structure-based targets can capture larger moves.
-
1% is the conservative standard taught at most prop firms. 2% is acceptable for experienced traders with proven edge. Above 2% gets risky: a 5-loss streak at 3% costs 14%; at 5% costs 23%. For backtest analysis with positive expectancy, you can quantify the optimal size via Kelly Criterion + drawdown tolerance. For real trading without years of statistical confidence in your edge, 1% is right. Bigger accounts can scale this DOWN further (0.5% on $1M+ accounts) since dollar risk gets large quickly.
-
Forex + crypto: yes, the math is identical. Use price levels regardless of pair or symbol. Leverage doesn't change R:R math — but it changes effective position size. Be careful: 10× leverage means 1% account risk becomes 10× exposure, magnifying both wins and losses. Options: more complex — risk isn't just stop-distance. For long options, max loss = premium paid (R:R = (target − premium) / premium for ITM strategy). For spreads, R:R = max profit / max loss. This calculator works for simple stop/target trades; for options, use options-specific calculators that account for theta + delta.
-
The mathematically optimal position size for maximising long-term geometric growth, given known win rate + R:R: f* = (bp − q) / b, where b = R:R, p = win rate, q = 1 − p. Example: 1:2 R:R + 50% win rate → f* = 25% per trade. Problem: full Kelly is too aggressive in practice — small estimation errors in win rate produce huge drawdowns. Most professionals use "fractional Kelly" (¼ or ⅓ of full Kelly), which approximates the 1-2% rule for typical R:R + win rate combos. For trading, the 1-2% rule of thumb is functionally similar to ¼-Kelly and much easier to apply.
-
Yes — they're linked by expectancy math. Strategies cluster into archetypes: High win rate + low R:R (scalping, mean-reversion): 70-80% win rate with 1:1 R:R. Sensitive to losing streaks. Low win rate + high R:R (trend-following, breakout): 30-40% win rate with 1:3+ R:R. Long stretches of small losses, occasional big wins. Balanced: 50-60% win rate with 1:1.5-2 R:R. Most retail traders. Pick the archetype that fits your psychology — both can be profitable; neither is universally better.
-
Material impact, especially on smaller R:R setups. The bid-ask spread + slippage typically costs 1-3 ticks per round-trip in liquid markets, more in illiquid ones. For a 10-tick risk + 20-tick reward (1:2 R:R), 2 ticks of spread/slippage effectively makes it 1:1.5. For scalping with tighter R:R, transaction costs can flip a positive-expectancy strategy negative. Always include transaction costs in backtest math; many retail traders ignore them and end up confused about why their "edge" doesn't materialise. Check your own broker's commission floor, exchange fee schedule or typical spread and add the round trip to the stop distance before computing the ratio.
-
No. All calculations run entirely in your browser via JavaScript. There's no server roundtrip — open DevTools → Network and confirm zero outbound requests as you change inputs. Your trade details stay on your device. Safe for confidential trading plans, prop firm pre-trade checks, or any sensitive trading data.
-
Three intertwined reasons. (1) Poor R:R discipline: taking 1:1 trades with random outcomes — guaranteed to break even minus transaction costs (i.e., lose). (2) Bad position sizing: risking 5-20% per trade and getting wiped out by inevitable losing streaks. (3) Behavioural mistakes: moving stops further away (loss aversion), taking profits too early (recency bias), revenge-trading after losses. Mathematical discipline (this calculator's framework) addresses #1 and #2. Behavioural discipline is harder — most retail traders need to lose money for several years before internalising that the math is unforgiving and emotions are the enemy.
Method & sources
How it computes
Risk per share = |entry − stop|; reward per share = |target − entry|; R = reward ÷ risk; break-even win rate = 1 ÷ (1 + R); max loss = account × risk%; shares = floor(max loss ÷ risk per share); position value = shares × entry. Direction validation: long requires stop < entry < target, short the reverse.
What this tool implements
- Break-even win rate from zero-expectancy: p·R − (1−p) = 0 ⇒ p = 1/(1+R)
- Fixed-fractional position sizing (1–2% of account) as the conservative fraction of the Kelly criterion f* = (bp − q)/b (Kelly 1956)
- Gross ratio only — spread, commission and slippage must be added to the stop distance by the user; SGX 100-share board lots and minimum commissions discussed
- Advisory bands: R < 1 negative expectancy, 1–1.5 marginal, 1.5–3 healthy, ≥ 3 excellent
Sources
- Kelly JL. A New Interpretation of Information Rate. Bell System Technical Journal 1956;35(4):917-926.
- Thorp EO. The Kelly Criterion in Blackjack, Sports Betting, and the Stock Market. In: Zenios SA, Ziemba WT, eds. Handbook of Asset and Liability Management, Vol 1. Amsterdam: North-Holland; 2006. p. 385-428.
- Vince R. The Mathematics of Money Management: Risk Analysis Techniques for Traders. New York: Wiley; 1992.
What can make this go out of date
- none at runtime. The prose previously asserted a MAS 20:1 retail leverage cap dated October 2019; neither the ratio nor the date could be confirmed from any MAS page on 2026-09-14, and the sentence now names the Margin Requirements for Exempt Financial Institutions Regulations 2018 and the Financial and Margin Requirements for CMS Licence Holders Regulations instead. The SGX 100-share board lot (Jan 2015) is still quoted in prose.
Pick up where you left off
Stored only in this browser — never sent to our servers.