Risk:Reward Calculator

Risk:Reward Calculator | The Payout Report Academy
Free Professional Tool

Risk:Reward Calculator

Enter your entry, stop loss and take profit — instantly visualise your trade setup, break-even win rate, and expected value across 100 trades.

Trade Setup

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⚖️

Ready to Calculate

Enter your entry price, stop loss and take profit — then press Calculate to see your full trade analysis.

Understanding Risk:Reward

How Risk:Reward Actually Works

Risk:Reward is the single most misunderstood concept in trading. It’s not just about picking a number — it’s about understanding the mathematical relationship between how often you win and how much you make when you do.

1

Define Your Risk

Your risk is the distance from your entry to your stop loss, multiplied by your pip value at your lot size. This is the exact dollar amount you lose if the trade goes against you. Set this first — always.

2

Define Your Reward

Your reward is the distance from entry to take profit, multiplied by pip value. Your R:R ratio is simply Reward ÷ Risk. A 1:2 ratio means you make $2 for every $1 you risk.

3

Break-Even Win Rate

The minimum win rate to not lose money at a given R:R. Formula: 1 ÷ (1 + R:R). At 1:2 you need only 33.3% wins. At 1:3 only 25%. This is why high R:R ratios are so powerful.

4

Expected Value

Expected value (EV) tells you the average profit or loss per trade over time. EV = (Win Rate × Profit) − (Loss Rate × Risk). Positive EV = profitable system. Negative EV = losing system, regardless of short-term results.

📐 Core Formulas

R:R Ratio = TP Distance ÷ SL Distance Break-Even WR = 1 ÷ (1 + R:R) × 100% EV per trade = (WR × Profit) − (LR × Risk) Net (100 trades) = EV × 100

Example: 1:2 R:R with 40% win rate. EV = (0.40 × $200) − (0.60 × $100) = $80 − $60 = +$20 per trade. Over 100 trades: +$2,000.

⚖️ Why R:R Changes Everything

R:R 1:1 needs 50% win rate to break even R:R 1:2 needs 33% win rate to break even R:R 1:3 needs 25% win rate to break even R:R 1:4 needs 20% win rate to break even R:R 1:5 needs 17% win rate to break even

A higher R:R ratio gives you room to be wrong more often and still profit. With a 1:3 R:R you can lose 3 out of every 4 trades and still break even — this is why prop firm traders aim for 1:2 minimum.

🏆 Prop Firm Application

Challenge rule: protect daily drawdown Strategy: 1:2+ R:R keeps risk tight → hit TP once = recover 2 stopped trades → 3 wins from 10 trades still profitable Consistency: same R:R every trade → steady equity curve → pass challenges

Prop firms reward consistency. A trader with a 45% win rate and 1:2 R:R has a positive EV and a steady equity curve — far more likely to pass than a 70% win rate trader using random R:R.

⚠️ Common Mistakes

❌ Moving SL after entry → ruins your R:R ❌ Taking partials without calculating new R:R ❌ Chasing price → worse entry = worse R:R ❌ Using R:R without knowing your win rate ❌ 1:5 R:R with 10% win rate → still losing

R:R is only half the picture. It must be paired with a realistic win rate. A 1:10 R:R sounds amazing but if you only win 5% of trades, your EV is deeply negative. Track both.

📚 Key Terms Glossary

Every term you need to understand R:R properly

Risk:Reward Ratio
The ratio of potential loss (SL distance) to potential gain (TP distance). 1:2 means risking $100 to make $200. Always calculate before entering a trade.
Break-Even Win Rate
The minimum percentage of winning trades needed to avoid losing money. Formula: 1 ÷ (1 + R:R). At 1:2 R:R: 1 ÷ 3 = 33.3%.
Expected Value (EV)
Average profit or loss per trade over a large sample. EV = (Win% × Profit) − (Loss% × Risk). Positive EV is the goal. Negative EV will lose money long-term no matter what.
Win Rate
Percentage of trades that close at take profit. Track this accurately over at least 50–100 trades. Most profitable strategies have win rates between 35% and 65%.
Expectancy
Another term for EV. Positive expectancy means the system is profitable long-term. Negative expectancy means it will inevitably lose. Measure in R (multiples of risk) per trade.
Profit Factor
Total gross profit divided by total gross loss. A profit factor above 1.5 is considered solid. Above 2.0 is excellent. Below 1.0 means the strategy is losing money.
R Multiple
Each trade result expressed as a multiple of your risk. +2R means you made 2× your risk. −1R means you lost your risk amount. Tracking R multiples removes dollar bias from performance analysis.
SL Distance
The number of pips between your entry and stop loss. This is NOT chosen arbitrarily — it must be placed at a technically valid level where your trade idea is invalidated.
TP Distance
The number of pips between entry and take profit. Determined by the next major resistance (longs) or support (shorts). Should be at least 2× the SL distance for a 1:2 R:R minimum.
Win Rate vs R:R Reference

The Complete R:R & Win Rate Matrix

Every combination of win rate and R:R ratio, showing the expected net result over 100 trades. Green = profitable system. Red = losing system. Use this to understand where your strategy sits.

📊 R:R vs Win Rate — Net P&L Over 100 Trades

Assumes fixed $100 risk per trade, $100 stake

Win Rate ↓ / R:R → 1:1 1:1.5 1:2 1:2.5 1:3 1:4 1:5

✅ What Makes a Good System

Benchmarks to aim for

Minimum viable: R:R ≥ 1:2 with win rate ≥ 35%
Solid system: R:R ≥ 1:2 with win rate ≥ 45% → EV +$5 per trade
Strong system: R:R ≥ 1:3 with win rate ≥ 40% → EV +$20 per trade
Prop firm ready: R:R ≥ 1:2, consistent win rate, steady equity curve
Professional target: Profit factor ≥ 1.5, Expectancy ≥ +0.3R per trade

❌ Warning Signs

These setups will lose long-term

Losing system: R:R below 1:1 at any win rate below 60%
Dangerous habit: Moving SL to breakeven too early — turns 1:2 into 1:0.5
False confidence: High win rate with low R:R (1:0.5 at 70% = −$10/trade)
Prop firm killer: Inconsistent R:R across trades destroys consistency score
Sample size error: Claiming a system works after fewer than 50 trades