Risk/reward and breakeven win rate calculator
How much a trade can make for every unit it risks – and how often it has to work.
Short answer
Risk/reward (R:R) = distance from entry to target ÷ distance from entry to stop, and the breakeven win rate = 1 ÷ (1 + R:R): at 1 : 3 you break even when 25% of trades reach the target. Example: a long at 100 with the stop at 98 and the target at 106 risks 2 to make 6, so R:R is 1 : 3. With 0.055% fees per side the same trade risks 2.11 to make 5.89 per unit: R:R falls to 1 : 2.79 and the breakeven win rate rises to 26.4%.
The formulas
Long: risk = entry − stop, reward = target − entry. Short: risk = stop − entry, reward = entry − target.
Risk/reward = reward ÷ risk, written 1 : R:R.
Breakeven win rate = risk ÷ (risk + reward) = 1 ÷ (1 + R:R).
With fees: loss at the stop = risk + (entry + stop) × fee rate; win at the target = reward − (entry + target) × fee rate. The calculator shows “–” when the stop or the target sits on the wrong side of the entry, and when fees eat the whole reward.
Breakeven win rate by risk/reward
| Risk/reward | Breakeven win rate | With 0.1 R costs per trade | Expectancy at a 40% win rate |
|---|---|---|---|
| 1 : 0.5 | 66.7% | 73.3% | −0.4 R |
| 1 : 1 | 50% | 55% | −0.2 R |
| 1 : 1.5 | 40% | 44% | +0 R |
| 1 : 2 | 33.3% | 36.7% | +0.2 R |
| 1 : 2.5 | 28.6% | 31.4% | +0.4 R |
| 1 : 3 | 25% | 27.5% | +0.6 R |
| 1 : 4 | 20% | 22% | +1 R |
| 1 : 5 | 16.7% | 18.3% | +1.4 R |
Computed: breakeven = 1 ÷ (1 + R:R); with costs c in R per trade: (1 + c) ÷ (1 + R:R), because a winner makes R:R − c and a loser costs 1 + c. Expectancy = 0.4 × R:R − 0.6, before costs.
Why the planned R:R is not the real one
The planned R:R assumes every trade ends at the stop or at the target. Real trades are closed early, scaled out, slip past the stop and pay fees on both sides – and a target twice as far away is usually hit less often. What counts is the average win and loss you actually get, in R, together with your real win rate: put them into the expectancy calculator to see whether the system makes money on average. The R-multiple calculator measures single trades in the same unit, and the position size calculator turns the stop distance into a size. The terms risk/reward ratio, breakeven win rate and expectancy are defined with their formulas in the glossary.
Planned against real R in the Edgetrail journal
When you enter a stop and a target, the Edgetrail journal shows each trade’s planned R:R next to the R it actually made after fees, and how far each exit deviated from the plan. Over many trades that shows whether you cut winners short or let losers run past the stop. Which win rate is good for your R:R is worked through in what is a good win rate, the matching profit factor in what is a good profit factor, and how a losing streak hits your account at a given risk per trade in the risk of ruin calculator. Edgetrail costs $24 a month or $199 a year; the first 50 Founders pay $99 once, after that a Lifetime plan costs $249 once. The first 14 days are free without a credit card, and every payment comes with a 14-day money-back guarantee.
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Frequently asked questions
What is a good risk/reward ratio?
There is no single good value, because risk/reward only means something together with the win rate. At 1 : 2 you need more than 33.3% winners to make money before costs, at 1 : 1 more than 50%.
How do you calculate the breakeven win rate?
Divide 1 by 1 plus the risk/reward ratio. At 1 : 3 that is 1 ÷ 4 = 25%; with costs c in R per trade it becomes (1 + c) ÷ (1 + R:R).
Is a higher risk/reward always better?
No. A target further away is usually reached less often, so the win rate falls. A system is only better if win rate and average win together give a higher expectancy.
Do fees change the risk/reward ratio?
Yes. In the example, 0.055% per side turns 1 : 3 into 1 : 2.79 and lifts the breakeven win rate from 25% to 26.4%. The tighter the stop, the bigger the effect.
Keep reading
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