What is a good risk/reward ratio?
There isn’t a best one: it depends on your win rate. A 1 : 1 with a 60% win rate makes more than a 1 : 3 with 20%. What matters is a positive expectancy (wins × ratio − losses).
Risk/reward calculator
Your trade’s ratio, the win rate you need not to lose and what you make on average per trade.
- ECBOfficial exchange rates every day
- CMEOfficial futures specifications
Risk : reward
1 : 0,00
- Win rate to break even
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- Expectancy per trade
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- Over 100 trades
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Trade diagram
Ratio and the win rate it needs
For each ratio, the minimum share of winning trades needed not to lose money (before commissions and spread).
| Ratio | Break-even win rate | With a 40% win rate | With a 50% win rate |
|---|---|---|---|
| 1 : 0.5 | 66.7% | -0.40 R | -0.25 R |
| 1 : 1 | 50.0% | -0.20 R | +0.00 R |
| 1 : 1.5 | 40.0% | +0.00 R | +0.25 R |
| 1 : 2 | 33.3% | +0.20 R | +0.50 R |
| 1 : 2.5 | 28.6% | +0.40 R | +0.75 R |
| 1 : 3 | 25.0% | +0.60 R | +1.00 R |
| 1 : 4 | 20.0% | +1.00 R | +1.50 R |
| 1 : 5 | 16.7% | +1.40 R | +2.00 R |
R is what you risk on each trade: +0.40 R per trade with a $100 risk is $40 on average.
How it works
The risk/reward ratio compares what you lose if the stop is hit with what you make if the target is reached. With a 20-pip stop and a 50-pip target, the ratio is 1 : 2.5.
The ratio alone doesn’t say whether a strategy makes money: it has to be combined with the win rate. At 1 : 2 you only need to win more than 33.3% of the time; at 1 : 1, more than 50%.
Frequently asked questions
How is the break-even win rate calculated?
It is 1 ÷ (1 + ratio). With a 1 : 2 ratio → 1 ÷ 3 = 33.3%. Above that win rate the strategy makes money over time, before commissions and spread.
What is expectancy in R?
What you make on average per trade measured in units of risk (R). With a 45% win rate and a 1 : 2.5 ratio: 0.45 × 2.5 − 0.55 = +0.575 R. If you risk $100 per trade, that is $57.50 on average.