Risk to Reward Ratio Calculator

Risk/Reward Ratio Calculator Illustration

What is a Risk-to-Reward Ratio Calculator?

A Risk-to-Reward Ratio Calculator is a tool that helps traders measure how much potential profit they stand to gain compared to the amount they risk losing on a trade. By entering details like entry price, stop-loss level, and take-profit target, the calculator shows the exact ratio of risk versus reward.

This makes it easier to evaluate whether a trade is worth taking, maintain consistent risk management, and align trading decisions with long-term profitability goals.

Why the Risk-to-Reward Ratio is Important in Trading?

The Risk-to-Reward Ratio is crucial in trading because it defines the balance between how much you stand to lose if a trade goes against you versus how much you can gain if it works in your favor. It helps traders focus not just on winning trades, but on making profitable ones over the long run.

Even with a low win rate, a favorable risk-to-reward ratio (like 1:2 or 1:3) can keep a strategy profitable, since your winners outweigh your losers. Without it, traders risk overexposing themselves to losses, chasing small gains with big risks, and struggling to stay consistent. In short, managing risk-to-reward effectively is one of the foundations of sustainable and disciplined trading.

How to Use the Risk-to-Reward Ratio Calculator

Using our Risk and Reward Calculator is simple and helps you quickly assess your desired risk-reward ratio for your trades and the required win rate to ensure profitability.

Here's how to use our Risk/Reward calculator:

Enter your Entry Price

The price at which you plan to open the trade.

Set your Stop-Loss Level

The stop-loss price where you'll exit if the trade goes against you (defines your risk).

Set your Take-Profit Level

The profit price where you'll exit if the trade goes in your favor (defines your potential reward).

Click Calculate

The tool will instantly display your risk-to-reward ratio and the required breakeven win rate for profitability.

FAQs

Read our frequently asked questions below. If you still need help, contact us today.

What is a good risk-to-reward ratio?

That is subjective to one's preference and trading style. A good risk/reward ratio is typically anything that allows you to stay profitable and not lose money without needing an unrealistically high win rate. Many traders aim for at least 1:2—risking $1 to potentially make $2—since this means you only need to win about 33% of your trades to break even. Ratios like 1:3 or higher are even better, as they lower your required win rate further. That said, the "best" ratio depends on your trading style: scalpers may use smaller ratios (like 1:1) with high win rates, while swing or trend traders often target higher risk/reward ratios (1:2, 1:3, or more). In general, a good ratio is one that fits your strategy and keeps your edge sustainable over time.

Can you calculate the Risk/Reward ratio on MT5?

Yes, it is possible to calculate the Risk/Reward ratio directly on MT5. In MetaTrader 5 (MT5), you can work out the risk-to-reward (R/R) ratio either by using the built-in Fibonacci tool or by adding a custom Risk/Reward Ratio indicator via a plugin. With the Fibonacci tool, you can visually place your Stop Loss and Take Profit levels on the chart, and it will automatically show the R/R ratio. Custom indicators provide the same convenience but often go further, adding features like automated position sizing and more streamlined, visual displays.

What is the connection between risk-to-reward and win rate?

The connection between risk-to-reward ratio and win rate lies at the heart of trading profitability. Your win rate tells you how often your trades are successful, while your risk-to-reward ratio shows how much you gain when right compared to how much you lose when wrong. Together, they determine whether your trading strategy is profitable. For example, if you trade with a 1:1 risk-to-reward ratio, you need to win at least 50% of your trades to break even. But with a 1:3 ratio, you only need a win rate of around 25% to stay profitable, since your winners outweigh your losers. In short, the higher your reward relative to risk, the lower your required win rate, and vice versa.

Can you automate a fixed risk/reward ratio on a trading platform?

Yes, you can automate your chosen risk/reward ratio by using algorithmic AI tools. Here, at Switch Markets, we offer a free AI trading tool for all clients who make a deposit. This tool enables you to automate your trading strategies without any coding skills.

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