Enter your entry, stop loss and take profit prices to see the risk to reward ratio and the win rate you need.
The risk to reward ratio compares what you stand to lose with what you stand to gain. The risk is the distance from your entry to your stop loss. The reward is the distance from your entry to your take profit. If you risk 50 pips to make 150 pips, the ratio is 1 : 3, and the winning trade pays three times what the losing trade costs.
The ratio tells you how often you must win to break even. With a reward of R times the risk, you break even when your win rate is 1 ÷ (1 + R). At 1 : 3 that is 25%, so you could lose three of every four trades and still not lose money. At 1 : 1 you need to win half the time. The higher the ratio, the lower the win rate you need.
If you enter your own win rate, the calculator shows the expected result of each trade in units of risk. It is the win rate times the reward ratio, minus the loss rate. A positive number means the setup should make money over many trades, if your win rate estimate is right. A good ratio does not help if the win rate is too low, and a high win rate does not help if the ratio is too small.
Divide the distance from entry to take profit by the distance from entry to stop loss.
Many traders look for at least 1 : 2, but the right ratio depends on how often your trades win.
It is 1 ÷ (1 + R), where R is the reward divided by the risk. For 1 : 2 it is about 33%.
It is the average result per trade, in units of risk, if you repeat the same setup many times at a given win rate.
No. If the stop loss is below the entry it is a buy, and if it is above it is a sell. The take profit must be on the other side.
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