Reward-to-Risk Calculator
Calculate your R:R ratio and position size before entering any trade.
For educational purposes only. Not financial advice. Always manage your own risk.
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Frequently Asked Questions
What is a good risk/reward ratio for day trading?
Most professional day traders require a minimum 2:1 reward/risk ratio — the potential profit must be at least twice the potential loss. A 3:1 ratio or higher is considered excellent.
At 2:1 R:R you only need to win 34% of trades to break even; at 3:1 that threshold drops to 25%. Many scalping strategies remain profitable with a 1.5:1 ratio if the win rate consistently exceeds 40%.
What does R multiple mean in trading?
R multiple (R×) expresses a trade outcome as a multiple of your initial risk amount. If you risk $150 on a trade and net $300, you earned 2R. If you lose $75, you lost 0.5R.
Measuring results in R multiples makes comparing trades across different account sizes and position sizes meaningful. A trading edge is profitable when the average R multiple stays positive across 100+ trades — typically above 0.4R per trade after fees.
How does the risk/reward ratio relate to position sizing?
They work sequentially. First confirm your R:R meets your minimum threshold (commonly 2:1). Then use a position size calculator to find how many shares to buy so that your dollar loss at the stop equals your pre-defined risk budget — typically 1–2% of account equity.
The R:R ratio tells you whether a trade has positive expected value; position sizing controls exactly how many dollars ride on that expectation.
How do you calculate the risk/reward ratio for a trade?
Divide the distance from your entry to your target by the distance from your entry to your stop loss. For a long trade: R:R = (Target − Entry) ÷ (Entry − Stop). For a short trade flip the formula: R:R = (Entry − Target) ÷ (Stop − Entry).
Example: entry $50, stop $48.50, target $54 — reward is $4.00, risk is $1.50, so R:R = 2.67:1. Enter the three prices above and the calculator computes the ratio instantly.
Can a low win rate still be profitable with the right risk/reward ratio?
Yes. Profitability depends on the combination of win rate and R:R, not either factor alone. The expected value per trade = (Win Rate × Avg Win) − (Loss Rate × Avg Loss).
At 2:1 R:R you break even at a 33% win rate; at 3:1 the breakeven drops to 25%. Many professional trend-following traders win fewer than 40% of trades but maintain high average R multiples on winners, generating consistent positive expected value despite most trades being losers.
Should I use a fixed R:R minimum or adjust it per setup?
Set a hard floor and flex above it. Many risk-management frameworks use a non-negotiable minimum risk/reward ratio, then let the setup's chart structure determine whether a higher ratio is realistic.
The floor helps screen out trades with limited upside relative to risk. It is a planning rule, not a guarantee that the target will be reached.