# Risk to Reward Ratio Calculator

Jun 15, 2023Forex Calculator

Risk-to-Reward Calculator
Risk-to-Reward Ratio:
Breakeven Win Rate:

Risk to Reward ratio calculator in Forex gives you the ratio between stop loss and take profit level. It also represents R:R ratio that tells you how much the profit target is larger than the stop loss target compared to each other.

Risk to Reward ratio calculator is a helpful tool that gives you the ratio between stop loss and take profit to help you define the stop loss and take profit set correctly.

Read more: Set Stop Loss on Android MT4

If you do not know what is a good risk to reward ratio this article will show you how to calculate and you will understand why it is important. If the R:R ratio is low it will be harder to be profitable.

## Risk to Reward Ratio Calculator

Risk to reward calculator requires three pieces of information from you. Those are:

• entry price
• stop loss and
• take profit level

With these three informations the calculator calculates the difference between:

1. entry price and stop loss
2. entry price and take profit

These two price differences are important to define risk to reward ratio. Because the difference between the entry price and stop loss should be lower than the difference between the entry price and the profit level.

### Best Risk Reward Calculator

The best risk to reward calculator will require three levels, entry price, stop loss and take profit levels.

Then it will calculate risk:reward ratio for two different scenarios:

• Sell order

Sell order is when the :

• Take profit level < entry price < Stop loss level

and Buy order is when the

• Take profit level > entry price > Stop loss level

Then, the calculator will calculate a break even win rate which means you will know how much trades you need in percentage to close with profit from all trades you will have in order to be profitable.

## How Do You Calculate Risk-Reward?

To calculate risk reward ratio you need to have price difference between entry price and stop loss and take profit:

• |Entry price – Stop Loss|
• |Entry price – Take Profit|

The price difference gives you the comparison for the stop loss and take profit from the entry price which you then compare. That means you take the price difference for the stop loss and for the take profit.

Read more: What is Entry point in Forex

### Risk to Reward Ratio Formula

Formula for risk to reward ratio is this:

• For long positions:

Risk/Reward Ratio = (Entry Price – Stop Loss Price) / (Take Profit Price – Entry Price)

• For short positions:

Risk/Reward Ratio = (Stop Loss Price – Entry Price) / (Entry Price Take – Profit Price)

There are two different formulas which you use in case of long position and short position.

### 1:3 Risk Reward

With all this information provided let’s make an example where I will use Risk to Reward ratio 1:3.

1:3 risk reward means that I will have a stop loss difference equal to 1 and my profit target will be equal to 3. But, have in mind that 1 and 3 does not have to be 1 pip or \$1. The idea here is that the stop loss difference will be one level.

Let’s say stop loss is 10 pips. With 1:3 risk reward that means my take profit will be 3x more = 3×10 pips = 30 pips. The goal is to have profit 3x higher than the stop loss is.

First I will define three price levels:

• Entry price = 1.1234
• Stop Loss Price = 1.1220

We can see that the stop loss difference is 14 pips:

Entry price – Stop Loss = 1.1234 – 1.1220 = 0.0014 = 14 pips

Now, with 1:3 risk reward I need to have take profit 3x higher. That means take profit difference should be:

Take profit = 3 x 14 pips = 42 pips = 0.0042

Entry price + 42 pips = 1.1234 + 0. 0042 = 1.1276

Now we have price levels calculated with a 1:3 risk reward ratio. And those are:

• Entry price = 1.1234
• Stop loss = 1.1220
• Take profit = 1.1276

## Risk to Reward Calculator Example

Let’s use a risk to reward ratio calculator in a real example with the Metatrader platform.

I will use the EURUSD pair and I will try to define a long position. That means I want to open a Buy order. Buy order is a type of an order where stop loss is below entry price and take profit is above entry price.

In the image you can see where the levels are:

• Entry level = 1.07355
• Stop Loss = 1.06788
• Take profit = 1.08409 When you calculate the price difference between them you get these values:

Entry price – Stop loss = 1.07355 – 1.06788 = 0.00567

Take Profit – Entry price = 1.08409 – 1.07355= 0.01054 ### Calculate Risk to Reward Ratio

Now we can calculate risk to reward ratio manually by using one of these two formulas:

• For long positions:

Risk:Reward Ratio = (Entry Price – Stop Loss Price) / (Take Profit Price – Entry Price)

• For short positions:

Risk:Reward Ratio = (Stop Loss Price – Entry Price) / (Entry Price Take – Profit Price)

In this example I have a buy order example which is a long position. So I will use this formula:

Risk:Reward Ratio = (Entry Price – Stop Loss Price) / (Take Profit Price – Entry Price)

Risk:Reward Ratio = (1.07355 – 1.06788) / (1.08409 – 1.07355)

Risk:Reward Ratio = (0.00567) / (0.01054)

Risk:Reward Ratio = 0.538 ~ 0.54

We get 0.54 risk to reward ratio, but when we put this into more readable way we get this:

Risk:Reward Ratio = 0.54

Risk:Reward Ratio = 1 : 1.86 (0.54)

So, our risk:reward is 1:1.86.

### Risk:Reward Calculator Example

If we use risk to reward calculator with the same example we would have this. When you enter these three values you get R:R = 1:1.86. The same risk to reward ratio as we have got in manual calculation.

The R:R ratio calculator gives you a break even win rate which tells you how much percentage of all trades you open should be profitable trades to be breakeven.

In this case means that 34.98% of all trades should be profitable to be breakeven. And that means each trade you open should have R:R = 1:1.86.

If you open 10 trades with R:R = 1:1.86 you should have 34.98% of 10 trades profitable.

In a real trading example that would mean 4 trades out of 10 (4/10) should be profitable to be breakeven.

## FAQ

In this section you will find answers to the most asked questions regarding R:R ratio.

### What is 0.3 Risk-Reward Ratio?

Risk to Reward = 0.3 is equal as R:R = 1:3.33. And that because when you make reverse calculation for 0.3 Risk to reward ratio you have this:

R:R = 1: 1/0.3

R:R = 1: 3.33

### What is the 1% Risk-Reward Ratio?

1% in risk to reward does not exist. Because the risk to reward ratio is not calculated in percentage %. With risk to reward you are calculating the ratio between stop loss and take profit, risk to reward.

If you want to calculate win rate of your trades you use % in calculation.

### What is 1.5 Risk-Reward Ratio?

1.5 risk:reward ratio means 2:3 ratio.

Risk:Reward = 3:2

This means that you will lose more money than you will make. If you take one example this would be like this:

Putting stop loss to 3\$ with take profit set to 2\$. If you have 3 trades open you have:

• 1st trade positive = 2\$ profit
• 2nd trade negative = 3\$ loss
• 3rd trade positive = 2\$ profit

Total would be:

2\$ – 3\$ + 2\$ = 1\$

Eventually you would need more profitable trades to stay positive and that 60% of trades.

If you open 10 trades 6 trades should be positive to be breakeven.

That is why it is important to have R:R = 1:1+. Meaning the reward should be above 1 and the best would be to from 3 and more.

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However, there are no explicit or implicit warranties of accuracy. The user agrees not to hold GETKNOWTRADING.com or any of its affiliates, liable for trading decisions that are based on the calculators from this website.

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A Forex trader since 2009. I like to share my knowledge and I like to analyze the markets. My goal is to have a website which will be the first choice for traders and beginners. Market analysis is featured by Forex Factory next to large publications like DailyFX, Bloomberg... GetKnowTrading is becoming recognized among traders as a website with simple and effective market analysis.

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