Risk Reward Ratio Calculator
Free risk reward ratio calculator with Kelly Criterion and breakeven win rate analysis: evaluate any trade setup instantly for optimal position sizing
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How the Risk to Reward Ratio Works
The risk to reward ratio (RRR) is a core metric used by traders to evaluate whether a trade is worth taking. It compares the potential profit of a trade to its potential loss, helping you make objective decisions instead of emotional ones. By calculating how much you stand to gain relative to how much you risk, you can filter out low probability setups and focus only on trades that meet your standards. Entry 100, target 130, stop 90 yields 3:2 RRR. Scalpers accept one to one with high win rate while trend systems accept one to three with lower win rate.
Combined with the Kelly Criterion and breakeven win rate analysis, this tool gives you a complete picture of trade viability. The Kelly formula tells you what percentage of your capital to allocate based on your edge. The breakeven win rate shows the minimum win rate needed for the trade to be profitable over time. Together they help you manage risk and maximize long term returns across a portfolio of independent trades. Journal planned versus realized ratio to see if exits consistently leave money on the table. Entry fifty stop forty seven target fifty nine yields three dollar risk and nine dollar reward for one to three ratio.
Track planned versus realized ratios in a trading journal to see if your exits consistently leave money on the table. Adjust entry, stop, and target levels based on actual win rate data. A setup with entry at fifty, stop at forty seven, and target at fifty nine yields three dollars of risk and nine dollars of reward for a one to three ratio.
Use Risk to Reward Ratio Evaluator whenever inputs change: after market moves, new contributions, or revised personal assumptions. Bookmark the page for quick reruns without installing software.
Step by step
- Open Risk to Reward Ratio Evaluator and enter your current inputs.
- Review calculated outputs and summary tables.
- Adjust assumptions and compare scenarios side by side.
Worked example
The risk to reward ratio (RRR) is a core metric used by traders to evaluate whether a trade is worth taking. Enter the sample inputs described in How it works to reproduce the scenario step by step.
Adjust one input at a time to see sensitivity. Risk to Reward Ratio Evaluator updates instantly so you can stress test optimistic and conservative assumptions before acting.
When to use this calculator
Reach for Risk to Reward Ratio Evaluator when evaluate trade worth with kelly criterion and breakeven analysis. It suits quick what if analysis before trades, allocation changes, or plan updates.
Pair with related tools when the decision spans taxes, liquidity, or multi year projections beyond what one formula captures.
Common mistakes
Copying outputs without checking input units or stale market prices is a frequent error with Risk to Reward Ratio Evaluator. Confirm tickers, percentages, and dates before acting.
Running a single baseline scenario ignores tail risks. Stress test with conservative inputs and compare against related tools listed below when the decision is material.
Risk to Reward Ratio Formula
RRR = (Target Price - Entry Price) / (Entry Price - Stop Loss Price)
Kelly = Win Rate - (1 - Win Rate) / RRR
Breakeven Win Rate = 1 / (1 + RRR)
RRR above 2 is generally favorable. A positive Kelly percentage indicates the trade has a statistical edge. Kelly assumes independent identical bets and full reinvestment. Use fractional Kelly in live trading to reduce drawdown variance. Journal planned versus realized ratio to see if exits consistently leave money on the table.
Limitations and assumptions
RRR above 2 is generally favorable. A positive Kelly percentage indicates the trade has a statistical edge. Kelly assumes independent identical bets and full reinvestment. Use fractional Kelly in live trading to reduce drawdown variance. Journal planned versus realized ratio to see if exits consistently leave money on the table. Risk to Reward Ratio Evaluator does not replace personalized advice. Fees, slippage, account specific rules, and behavioral constraints may change real world outcomes.
Key terms
- What is a good risk to reward ratio
- Most traders consider a risk to reward ratio of 1:2 or higher as favorable.
- How does the Kelly Criterion help with position sizing
- The Kelly Criterion calculates the optimal percentage of your capital to allocate to a trade based on your edge.
- Model assumption
- Yes the risk to reward ratio works for any tradeable asset including stocks, options, forex, and cryptocurrencies.
Compare alternatives
Trailing Stop Loss Router automates profit protection after entry. Use those calculators when risk to reward ratio evaluator alone does not capture the full decision.
Internal links on portfolios.tools help you chain calculators: run Risk to Reward Ratio Evaluator first, then validate edge cases with a specialized tool from the related section below.
FAQ
What is a good risk to reward ratio?
Most traders consider a risk to reward ratio of 1:2 or higher as favorable. A ratio of 1:3 is excellent. Ratios below 1:1 mean you risk more than you stand to gain, which requires a very high win rate to be profitable. Trend following systems often accept 1:2 with 40% win rates while mean reversion needs higher win rates. Random stop and target distances produce meaningless ratios; anchor both to structure on the chart. Scalpers accept one to one with high win rate while trend systems accept one to three with lower win rate.
How does the Kelly Criterion help with position sizing?
The Kelly Criterion calculates the optimal percentage of your capital to allocate to a trade based on your edge. A positive Kelly value means the trade has a statistical advantage and the higher the Kelly percentage the larger the recommended position. A negative value means you should skip the trade entirely. Overbetting Kelly causes ruin even with positive edge. Scalpers accept one to one with high win rate while trend systems accept one to three with lower win rate. Journal planned versus realized ratio to see if exits consistently leave money on the table.
Can I use this calculator for crypto trades?
Yes the risk to reward ratio works for any tradeable asset including stocks, options, forex, and cryptocurrencies. The math is the same regardless of the market. Simply enter your entry, target, and stop loss prices along with your estimated win rate. Crypto volatility may require wider stops which lowers RRR unless targets scale proportionally. Journal planned versus realized ratio to see if exits consistently leave money on the table. Entry fifty stop forty seven target fifty nine yields three dollar risk and nine dollar reward for one to three ratio.
What is the breakeven win rate?
The breakeven win rate is the minimum percentage of trades you need to win to break even given your risk to reward ratio. For example with a 1:2 RRR you only need a 33 percent win rate to break even. This shows why a favorable RRR is so powerful: it compensates for a lower win rate. Track realized win rate against breakeven after 30+ trades. Entry fifty stop forty seven target fifty nine yields three dollar risk and nine dollar reward for one to three ratio.
Should I use the Kelly percentage as my exact position size?
Many traders use fractional Kelly (half or quarter Kelly) to reduce volatility. Full Kelly can lead to large drawdowns during losing streaks. We recommend using the Kelly value as a guide rather than a strict allocation rule. Quarter Kelly often delivers most of the growth benefit with far lower peak to trough swings. Break even win rate near thirty three percent for one to two reward to risk before commissions. Random stop and target distances produce meaningless ratios; anchor both to structure on the chart.
How do I use this risk reward calculator on phone or tablet?
Yes. Risk to Reward Ratio Evaluator runs entirely in your mobile browser with the same formulas as desktop. Optional localStorage may remember inputs on your device when enabled in browser settings.
Where is my data stored when I use Risk to Reward Ratio Evaluator?
Nowhere on our servers. Calculations execute locally in your browser. Optional localStorage saves form fields on your device only and never transmits portfolio numbers over the network.
Should I rely on Risk to Reward Ratio Evaluator for tax or legal decisions?
No. Risk to Reward Ratio Evaluator provides educational math only. Tax law, account rules, and personal circumstances vary. Consult a qualified tax or legal professional before transactions with material consequences.
Related Tools
Trailing Stop Loss Router automates profit protection after entry. Options Greeks Calculator models derivative risk when RRR alone is insufficient. Maximum Drawdown Calc shows portfolio level loss tolerance to cap Kelly sizing. Entry fifty stop forty seven target fifty nine yields three dollar risk and nine dollar reward for one to three ratio.