The risk reward ratio compares what you stand to lose if the stop loss is hit with what you stand to gain if the target is reached. It tells you how often a setup has to work for the numbers to add up.
How the risk reward calculator works
The formulas are:
Risk : Reward = (Target − Entry) ÷ (Entry − Stop loss)
Breakeven win rate = 1 ÷ (1 + Reward ÷ Risk)
Entry ₹500, stop ₹480 and target ₹560 is ₹20 of risk for ₹60 of reward, a 1 : 3 trade. It breaks even if it works one time in four, before costs.
Frequently asked questions
What is a good risk reward ratio?
There is no single good number. A 1 : 1 setup can work with a high win rate, and a 1 : 3 setup can work with a low one. What matters is the ratio together with how often the setup works.
Does a high ratio mean a better trade?
Not by itself. A far target is reached less often, so a high ratio usually comes with a lower win rate.
Does this include brokerage and taxes?
No. Charges reduce the reward and add to the risk, so the real breakeven win rate is a little higher.
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This calculator is for education and illustration. Results are estimates based on the numbers you enter and are not a prediction, guarantee or investment advice.