Risk Reward Calculator
Calculate risk-to-reward ratio, position size, and potential profit or loss from your entry, stop loss, and take profit levels.
Quick Answer
Risk-to-reward ratio = potential profit divided by potential loss. A 1:3 R:R means you risk $1 to make $3. Most professional traders target a minimum 1:2 ratio. Enter your entry price, stop loss, and take profit to see the exact ratio and the ideal position size for your dollar risk amount.
Trade Analysis
Detailed Breakdown
| Entry Price | $100.00 |
| Stop Loss | $95.00 |
| Take Profit | $115.00 |
| Risk per Share | $5.00 |
| Reward per Share | $15.00 |
| Position Size | 100 shares |
| Total Position Value | $10,000.00 |
| Max Loss | $500.00 |
| Max Profit | $1,500.00 |
About This Tool
The Risk Reward Calculator is an essential tool for any trader who wants to manage their capital with discipline. By entering your planned entry price, stop loss level, and take profit target, the calculator instantly computes the risk-to-reward ratio and tells you exactly how many shares or contracts to buy based on the dollar amount you are willing to lose on the trade. This is the foundation of every profitable trading strategy: knowing your risk before you enter.
What Is Risk-to-Reward Ratio?
The risk-to-reward ratio, often written as R:R, compares the potential loss of a trade to its potential gain. A 1:2 ratio means you stand to make $2 for every $1 you risk. A 1:3 ratio means $3 of potential gain for every $1 at risk. Professional traders and fund managers use this metric as a primary filter before entering any trade. If the R:R does not meet their minimum threshold, they simply pass on the trade regardless of how strong the setup looks. This discipline is what separates consistently profitable traders from those who blow up their accounts.
Why R:R Matters More Than Win Rate
One of the most counterintuitive facts in trading is that you can be profitable while being wrong more than half the time. A trader with a 1:3 R:R only needs to win 25% of their trades to break even (excluding commissions). At a 35% win rate with a 1:3 R:R, you are solidly profitable. Conversely, a trader with a 1:1 R:R needs to win more than 50% to make money, which is significantly harder to sustain over thousands of trades. This is why experienced traders obsess over R:R and are willing to sacrifice win rate for better reward-to-risk setups.
Position Sizing: The Other Half
Knowing your R:R is only half the equation. The other half is position sizing, which determines how many shares to buy so that if you hit your stop loss, you only lose a predetermined dollar amount. Most professional traders risk 1-2% of their total account per trade. If you have a $50,000 account and risk 1%, your maximum loss per trade is $500. The calculator takes this dollar risk amount and divides it by the per-share risk (the distance between your entry and stop loss) to give you the exact number of shares to trade. This prevents any single trade from doing catastrophic damage to your account.
Long vs. Short Trades
The calculator supports both long and short trades. For a long trade, your stop loss is below your entry price and your take profit is above it. The risk per share is the entry minus the stop loss, and the reward per share is the take profit minus the entry. For a short trade, the math inverts: your stop loss is above your entry, your take profit is below, and you profit when the price falls. The toggle at the top of the calculator lets you switch between these modes, and it automatically validates that your stop loss and take profit levels make sense for the chosen direction.
Common R:R Targets by Trading Style
Different trading styles call for different R:R thresholds. Day traders often target a minimum of 1:1.5 to 1:2 because they take many trades per day and can afford a moderate ratio with a higher win rate. Swing traders typically aim for 1:2 to 1:3 since they hold positions for days or weeks and need each winner to compensate for the longer exposure time. Position traders and investors may target 1:3 or higher because they take fewer trades and each one needs to deliver meaningful returns to justify the opportunity cost. The calculator color-codes the ratio (red for under 1:1, amber for 1:1 to 1:2, green for 1:2 and above) to give you an instant visual assessment.