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Next: turn the ratio and win rate into an average
R and the break-even win rate set the bar. The expected value calculator takes your actual win rate and gives the average result per trade.
What is included
- The calculator, with your own numbers
- The formula written out
- A worked example you can reproduce
- Where grid, martingale and DCA bots break the maths
Who it is for
- People running or testing a trading bot
- Anyone sizing a position or checking costs
- Readers learning how the numbers work
- Not advice, and not for placing trades
Key facts
- Reward to risk (R) = |target - entry| / |entry - stop|. With costs, R = (reward - cost) / (risk + cost).
- Break-even win rate = 1 / (1 + R). At R of 2 you need to win about 1 trade in 3 to break even, before any other costs.
- The ratio alone says nothing. A 3 : 1 target that is rarely hit can lose money, and a 0.25 : 1 target that is hit nearly always can too.
- Costs matter most on small targets, because they take a bigger share of the reward and add to the risk.
- The target and stop are yours, and every example number is made up. This is arithmetic, not a prediction of where price goes.
How the calculator works
Every trade has a distance to the stop (what you lose if wrong) and a distance to the target (what you gain if right). The ratio of the second to the first is the reward to risk ratio, written R. A ratio of 2 means the target is twice as far away as the stop.
R after costs = (|target - entry| - cost) / (|entry - stop| + cost)
Break-even win rate = 1 / (1 + R)
The cost is per unit for the round trip, in and out. It is taken off the reward and added to the risk, because a trade that loses still pays it. The break-even win rate is the share of trades that must hit the target for wins and losses to cancel out, with these two numbers and nothing else.
A worked example
Take a made-up long trade of 50 units, entered at $100, with a stop at $95 and a target at $110. The risk is 50 x $5 = $250 and the reward is 50 x $10 = $500, so R = 2. The break-even win rate is 1 / (1 + 2) = 33.3 percent: win one in three at 2 to 1 and you are level. Now add a cost of $0.50 per unit round trip. The risk becomes $5.50 per unit and the reward $9.50, so R = 9.5 / 5.5 = 1.73 and the break-even win rate rises to 36.7 percent. Calculated by us on 27 Oct 2026, exact arithmetic on made-up inputs.
Why the ratio alone means nothing
A high ratio looks safe because the reward dwarfs the risk. It is only half of the picture. The target is farther away, so price reaches it less often, and a stop that is close is hit more often. Moving a target out raises R and lowers the win rate at the same time. The two trade against each other, and the product of them is the expected value: the average result per trade.
The break-even win rate is the bridge. Compare it with the win rate the strategy actually has in tests, measured over enough trades and after costs. If the real win rate is above the break-even, the average trade is positive. If it is below, the ratio is working against you however good it looks. The win rate calculator shows how loose a win rate is on a small sample.
Why high win rate bots have low ratios
Many grid, recovery and martingale bots show win rates of 80 to 95 percent in their reports. They get there by taking small profits quickly and giving the losing trade a lot of room, so R is far below 1. A made-up bot with a target of $1.25 against a $5 stop has R = 0.25 and needs a win rate of 80 percent to break even. At a $0.50 target the ratio falls to 0.1 and the break-even win rate rises to 90.9 percent. Winning nine trades in ten then still loses money on average, and the one loss in ten wipes out the nine wins and more. The martingale page shows how the losing end gets larger still.
Costs and small targets
A target of $1.25 with a cost of $0.50 leaves $0.75 of reward and $5.50 of risk, so R falls from 0.25 to 0.14 and the break-even win rate rises from 80 percent to 88 percent. Small targets lose most of their ratio to costs, which is why bots that scalp small profits are sensitive to the spread.
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FAQ
Frequently Asked Questions
What is a good risk reward ratio?
There is no ratio that is good on its own. It has to be paired with a win rate. A 1 to 1 ratio needs a win rate above 50 percent and a 3 to 1 needs above 25 percent, and the real question is whether the strategy hits that.
Does a 2 to 1 ratio mean I will make money?
No. It only means you need to win about one trade in three to break even. If the strategy wins less than that, it loses on average. The ratio sets the bar and does not clear it.
How do I include costs?
Enter the cost per unit for the round trip, such as the spread plus commission both ways. The tool adds it to the risk and takes it off the reward, which is what costs do to a real trade.
Why do high win rate bots usually have a low ratio?
Because they take small profits and give losses a lot of room. Winning often with a small gain and losing rarely with a large loss is the same shape as selling insurance: it pays until it does not.
Can the ratio change while the trade is open?
Yes, if you move the stop or the target, or if price moves. Once price is halfway to the target, the remaining reward is smaller while the risk may be the same, so the ratio of what is left is lower.
Are the numbers on this page real?
Example numbers are made up to show how the maths works, and the page says so. A figure only counts as exact when the page says it was calculated on a stated date. Nothing you enter in a calculator leaves your browser.
Can I use this to decide whether to run a bot?
It can show whether a bot's numbers hold together and how much an account can lose. It cannot say what the market will do, and it is not advice. Use it to ask better questions, then read the terms of your own broker or exchange.
Is this financial advice?
No. It is a calculator and general education. It does not know your strategy, your costs or your situation.
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