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The risk reward calculator gives the ratio, the break-even win rate and the average result for your entry, stop and target.
What is included
- What it is, in plain words
- The formula or mechanism, with exact arithmetic
- How it hits grid, martingale and DCA bots
- A check you can run before you switch a bot on
Who it is for
- People who run or plan to run a trading bot
- Anyone reading a backtest or a bot sales page
- Readers who want the numbers, not the pitch
- Not advice, and not a signal service
Key facts
- The risk reward ratio is the potential loss on a trade compared with its potential gain. Risking $100 to make $200 is a ratio of 1 to 2.
- Each ratio needs a minimum win rate to break even: 1 to 0.5 needs 66.7%, 1 to 1 needs 50.0%, 1 to 2 needs 33.3%, 1 to 3 needs 25.0% (calculated by us on 28 Oct 2026, exact, before costs).
- A good looking ratio does not make a strategy profitable. At a 40% win rate, 1 to 2 averages +0.20R a trade and 1 to 1 averages -0.20R.
- Ratio and win rate are linked. A far away target raises the ratio and usually lowers the win rate, so they cannot be set independently.
- A bot should be judged on the average result per trade after costs. The ratio is only one input.
The formula
Risk is the distance from your entry to your stop, multiplied by the size. Reward is the distance from your entry to your target, multiplied by the size. The ratio is reward divided by risk, often written as 1 : R, where R is how many times the risk the target pays.
Reward = (target - entry) x size
Reward to risk = reward / risk
Break even win rate = 1 / (1 + reward to risk)
Average result per trade = win rate x R - (1 - win rate) [in units of the risk]
A worked example
You buy at 100 with a stop at 98 and a target at 104. The risk is 2 a unit and the reward is 4 a unit, so the ratio is 1 to 2. The break even win rate is 1 / (1 + 2) = 33.3%. If you win more than a third of the time, before costs, you make money on average. If you win a quarter of the time, you lose.
Over 100 trades risking $100 each at a 40% win rate and a 1 to 2 ratio, the average result is +0.20R a trade, which is $2,000 in total. At 1 to 1 the same win rate averages -0.20R a trade, which is -$2,000. Same win rate, different ratio, opposite results.
Costs move the line
Every trade pays the spread and fees, which act as a fixed loss added to each trade. Take a made-up cost of 0.1R a trade, which is $10 on $100 of risk. At 1 to 2 and a 40% win rate the average falls from +0.20R to +0.10R. At 1 to 1 it falls from -0.20R to -0.30R. A tight stop makes this worse, because the cost is a bigger share of a small risk. See spread and the break-even calculator.
Why you cannot pick the ratio freely
A trader who moves the target from 1 to 1 out to 1 to 3 does not keep the old win rate. The price must travel three times as far before reversing, so fewer trades get there. The reverse is also true: a very near target wins often but pays little. What matters is the pair, measured on real trades, after costs. A backtest that picks the best looking pair has chosen it with hindsight, which is overfitting.
How bots misuse the ratio
- Chasing the ratio. Setting 1 to 5 because it sounds good, with a win rate so low that the losing runs are long. See risk of ruin.
- Ignoring the losing run. A 25% win rate means long strings of losses even when the maths works.
- Hiding a bad ratio behind a high win rate. Taking tiny profits and holding big losers gives a high win rate and a ratio far below 1. See martingale strategy.
- Fixed targets in changing markets. A target that suited a quiet market may never be reached in a calm one.
How to check a bot's ratio
Measure the average win and average loss from real or tested trades, including costs, and compute the ratio you actually get, not the one you set. Then check the win rate against the break even for that ratio. The risk reward calculator does the sums, and backtesting covers how to test without fooling yourself.
What this page does not tell you
It does not say which ratio to use. The win rates and costs are made up, and this is education, not advice.
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FAQ
Frequently Asked Questions
What is the risk reward ratio?
The potential loss on a trade compared with its potential gain, measured from the entry to the stop and to the target. Risking 1 to make 2 is a ratio of 1 to 2.
How do you calculate the risk reward ratio?
Divide the reward, the distance from entry to target times size, by the risk, the distance from entry to stop times size.
What win rate does a 1 to 2 risk reward ratio need?
About 33.3% to break even before costs, from 1 divided by 1 plus the ratio. Costs raise the figure.
Is a higher risk reward ratio always better?
No. A farther target usually lowers the win rate, so only the pair of ratio and win rate, measured after costs, tells you if a strategy makes money.
What is a good risk reward ratio for a trading bot?
There is no single good value. It depends on the win rate the rule actually achieves, so measure both on real or tested trades with full costs.
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 general education about a calculation. The win rates and costs are made up and it does not consider your situation.
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