How it's calculated
Risk per share (r) = |entry − stop|
Reward per share (w) = |target − entry|
R multiple = w ÷ r (risk : reward = 1 : w÷r)
Break-even win rate = r ÷ (r + w) = 1 ÷ (1 + R multiple)
With a share count: $ risk = shares × r, $ reward = shares × w
- Why that break-even formula? Suppose a fraction p of trades hit the target (gaining w) and the rest hit the stop (losing r). The average result per trade is p·w − (1 − p)·r, which is zero when p = r ÷ (r + w).
- That assumes every loser loses exactly the planned risk and every winner makes exactly the planned reward, with no commissions, slippage or gaps. Real trades often exit somewhere else, so treat the break-even win rate as arithmetic about the plan, not a forecast of how often a trade will work.
- Notation varies. "1:3 risk/reward" and "3:1 reward/risk" describe the same trade. This page shows both, plus the R multiple (3R means the reward is three times the risk).
- For a short trade, the stop is above the entry and the target below it. The table skips any short target that would be at or below $0.
- Verified two ways: hand-worked examples in our automated tests, and a separate Python program that recomputes thousands of random trades with decimal arithmetic.
Worked examples
1. A 3R long trade
Buy at $50, stop at $48, target $56. Risk = $2 a share, reward = $6, so the R multiple is 6 ÷ 2 = 3.00R (risk : reward 1 : 3). Break-even win rate = 2 ÷ (2 + 6) = 25.00%. With 100 shares: $200.00 at risk for a possible $600.00. Load this example
2. A short trade
Sell short at $120, stop at $125, target $110: risk $5, reward $10, 2.00R, break-even win rate 5 ÷ 15 = 33.33%. With 50 shares: $250.00 risk, $500.00 reward. Load this example
3. Reward smaller than risk
Buy at $20, stop at $18, target $21: risking $2 to make $1 is 0.50R. Trades like this need to win more than 66.67% of the time just to break even before costs. Load this example
Frequently asked questions
How do I calculate the risk/reward ratio?
Risk per share is the distance from entry to stop; reward per share is the distance from entry to target. Divide reward by risk. Entry $50, stop $48, target $56: risk $2, reward $6, so the trade is 1:3 risk/reward (3R).
What is a good risk/reward ratio?
There is no single good number, because a ratio only means something together with how often trades reach the target. Before costs, a 1:2 trade breaks even at a 33.3% win rate and a 1:1 trade at 50%. A 1:3 ratio with a 20% win rate still loses money. This calculator shows the arithmetic; it can't tell you how often a trade will work.
What is the break-even win rate?
The share of trades you would need to win for wins and losses to cancel out, if every win made exactly the planned reward and every loss cost exactly the planned risk: risk ÷ (risk + reward). At 1:3 that is 25%. Commissions and slippage push the real break-even point higher.
What does R multiple mean?
R is the amount you risk on a trade (entry to stop). A result expressed in R is a multiple of that risk: a 3R target makes three times what you risk, and hitting the stop is −1R.
Is 1:3 the same as 3:1?
Usually yes, it is just written in a different order. "Risk/reward 1:3" and "reward/risk 3:1" describe the same trade. That is why this page labels both and also shows the R multiple.
Does this include commissions or slippage?
No. It uses your exact entry, stop and target prices. Costs and fills at worse prices reduce the reward and increase the risk in practice.
Spotted an error?
Accuracy matters more than anything else here. If a number, formula or explanation on this page looks wrong, please email a correction. The email opens with this page's link, including your current inputs, already filled in. What to include in a report.