Risk-reward ratio calculator
Compare what you could lose with what you could gain on a trade, and see the win rate you need to break even.
What the risk-reward ratio tells you
The risk-reward ratio compares what you stand to lose if your stop-loss is hit with what you stand to gain if your target is reached. A ratio of 1:2.5 means you are risking ₹1 to make ₹2.50. On its own the ratio says nothing about whether a trade is good, because it ignores how often the target is actually reached. That is why the calculator also shows the breakeven win rate.
The formulas
Reward = |Target − Entry|
Ratio = Reward ÷ Risk
Breakeven win rate = Risk ÷ (Risk + Reward)
Worked example
Entry ₹500, stop-loss ₹480 and target ₹550 give a risk of ₹20 and a reward of ₹50 per share: a ratio of 1 : 2.5. The breakeven win rate is 20 ÷ 70 = 28.6%. If fewer than about 29 out of 100 similar trades reach the target, you lose money over time, before charges. With 50 shares, total risk is ₹1,000 and total reward ₹2,500.
Ratio and win rate together
| Risk : reward | Breakeven win rate |
|---|---|
| 1 : 0.5 | 66.7% |
| 1 : 1 | 50.0% |
| 1 : 1.5 | 40.0% |
| 1 : 2 | 33.3% |
| 1 : 3 | 25.0% |
A high ratio with a target that is rarely reached can be worse than a modest ratio that works often. Use your own trade history, not hope, to judge the win rate.
Why charges change the picture
The breakeven win rate above ignores costs. Charges are paid on winning and losing trades alike, so they raise the win rate you need, especially on small intraday moves. The brokerage calculator shows the breakeven move per share, which you can add to your risk and subtract from your reward for a more realistic ratio.
Common mistakes
- Moving the stop-loss further away after entering, which quietly changes the ratio.
- Setting a far target only to make the ratio look good.
- Ignoring gaps: the real loss can be larger than the planned risk.
Combine this with the position size calculator so that the rupee risk stays within your limit. The guide risk-reward ratio explained covers more examples.
Frequently asked questions
What is a good risk-reward ratio?
There is no single good ratio. It depends on how often your trades reach the target. A 1:2 ratio needs a win rate above 33.3% to break even before charges; a 1:1 ratio needs more than 50%.
How do I calculate the risk-reward ratio?
Divide the reward (target minus entry) by the risk (entry minus stop-loss). With entry ₹500, stop ₹480 and target ₹550, the ratio is 50 ÷ 20 = 2.5, written as 1:2.5.
What is the breakeven win rate?
It is the share of trades that must hit the target for wins and losses to cancel out: risk ÷ (risk + reward). At 1:2.5 it is 28.6%.
Is it risk to reward or reward to risk?
Both are used. TradeProfy writes it as risk : reward, so 1 : 2.5 means ₹1 risked for ₹2.50 of potential reward.
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Written and maintained by Mantu Kumar
Mantu builds TradeProfy’s calculators and checks every statutory rate against exchange circulars, broker rate cards and the Finance Act. He is not a SEBI-registered adviser, so TradeProfy explains costs and maths but never tells you what to trade.
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