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Risk-Reward Calculator

Enter a long or short trade’s entry price, stop loss and target to calculate the planned risk, potential reward, risk-to-reward ratio and break-even win rate. Add quantity when you also want gross monetary risk and reward.

Free & InstantLong & Short SetupsR-Multiple & Win Rate
Trade Direction
Result
Risk-Reward Analysis
Planned Ratio & R Multiple
1 : 3.00
Target = 3.00R

A 1:3.00 risk-to-reward ratio means one unit of planned risk for 3.00 units of potential reward. The same setup is a 3.00R target.

Risk per unit₹ 50
Potential reward per unit₹ 150
Stop distance3.33%
Target distance10.00%
Total planned risk₹ 5,000.00
Total potential reward₹ 15,000.00
Break-even win rate before costs25.00%
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How to use the risk-reward calculator

  1. 1Choose trade direction: Select Long when expecting prices to rise, or Short when expecting prices to fall.
  2. 2Enter planned entry price: Input your target entry level in rupees or preferred quote currency.
  3. 3Enter stop-loss & target prices: Define where the trade setup becomes invalid and where profits will be taken.
  4. 4Add position quantity (optional): Enter share/lot quantity to view monetary gross risk and monetary potential reward.
  5. 5Evaluate R-multiple & break-even win rate: Review 1:X ratio, R-multiple, and the minimum win rate required to break even.

Your calculation

Here is how your entered values translate into the risk-reward ratio and R multiple:

Risk per unit = Entry (₹1,500) − Stop loss (₹1,450) = ₹50
Potential reward per unit = Target (₹1,650) − Entry (₹1,500) = ₹150
Reward multiple = Potential reward (₹150) ÷ Risk (₹50) = 3.00R
Risk-to-reward = 1 : 3.00
Break-even win rate = 1 ÷ (1 + 3.00) = 25.00%
Total planned risk = Risk per unit (₹50) × Quantity (100) = ₹5,000.00
Total potential reward = Potential reward per unit (₹150) × Quantity (100) = ₹15,000.00

What does a risk-to-reward ratio mean?

The risk-to-reward ratio compares the price distance from entry to stop loss with the distance from entry to target. A 1:2 risk-to-reward ratio means 1 unit of planned risk for 2 units of potential reward (or a 2.00R target).

The ratio describes entered price levels. It does not predict target probability or guarantee profit. A trade with a large planned ratio can still lose. A trade with a smaller ratio can belong to a profitable historical strategy when supported by realised win rate, average winner, and low execution costs.

Risk-to-reward, reward-to-risk, and R multiples

These terms describe related concepts but carry specific conventions:

  • Risk-to-reward (1:X): Normalised to 1 unit of risk (e.g. 1:2.00).
  • Reward-to-risk multiple: Reward divided by risk (e.g. 2.00).
  • R multiple (XR): Entry-to-stop distance equals 1R. A target twice that distance is 2R. Realised R uses the actual exit after trade execution.

Worked calculation examples

The examples below illustrate hypothetical gross calculations for long and short trade setups before brokerage, taxes, spreads, slippage and price gaps.

Long trade example

1:2.00 Ratio on a Long Setup

Entry at ₹500, stop loss at ₹480, target at ₹540 with 100 units.

Entry: ₹500 | Stop: ₹480 | Target: ₹540
Risk per unit = ₹500 − ₹480 = ₹20
Potential reward = ₹540 − ₹500 = ₹40
Risk-to-reward = 1:2.00 (2.00R)
Total risk (100 qty) = ₹2,000
Total reward (100 qty) = ₹4,000
Break-even win rate = 33.33%
Short trade example

1:2.00 Ratio on a Short Setup

Sell short at ₹500, stop loss at ₹520, target at ₹460 with 100 units.

Entry: ₹500 | Stop: ₹520 | Target: ₹460
Risk per unit = ₹520 − ₹500 = ₹20
Potential reward = ₹500 − ₹460 = ₹40
Risk-to-reward = 1:2.00 (2.00R)
Total risk (100 qty) = ₹2,000
Total reward (100 qty) = ₹4,000
Break-even win rate = 33.33%

Break-even win rate and risk-reward

Ignoring costs, simplified break-even win rate is calculated as: Break-Even Win Rate = 1 ÷ (1 + Reward Multiple).

Risk-to-RewardReward MultipleSimplified Break-Even Win Rate
1:11.00R50.00%
1:1.51.50R40.00%
1:22.00R33.33%
1:33.00R25.00%

Frequently asked questions

What is a risk-reward calculator?

A risk-reward calculator compares the planned price risk between entry and stop loss with the potential reward between entry and target. It can also show the reward multiple, gross monetary risk and reward when quantity is entered, and a simplified break-even win rate before costs.

How is risk-to-reward ratio calculated?

For a long trade, subtract the stop loss from entry to calculate risk, then subtract entry from target to calculate potential reward. For a short trade, subtract entry from the stop for risk and subtract target from entry for reward. Divide reward by risk and display it as one unit of risk, such as 1:2.

What does a 1:2 risk-to-reward ratio mean?

A 1:2 ratio means the planned potential reward is two times the initial risk. If the price risk is ₹20 per unit, a 1:2 target is ₹40 away from entry in the favourable direction. It can also be written as a 2R target.

What is a good risk-to-reward ratio?

There is no universal ratio that is best for every trade or strategy. Suitability depends on target realism, historical win rate, average realised winner and loser, volatility, liquidity, holding period, execution, costs and risk tolerance. Review the ratio together with historical expectancy rather than forcing every setup to meet one fixed number.

Is a higher risk-to-reward ratio always better?

No. A higher displayed ratio often requires a more distant target, which may be reached less frequently. Moving the stop closer or target farther only to increase the ratio can make the plan unrealistic. A useful ratio must come from valid entry, invalidation and target levels.

How do I calculate risk-reward for a short trade?

For a short trade, risk per unit equals stop-loss price minus entry price. Potential reward per unit equals entry price minus target price. The target should normally be below entry and the stop above entry.

How does quantity affect total planned risk?

Quantity does not change the ratio because both risk and reward scale by the same amount. It changes the money values. Total planned risk equals risk per unit multiplied by quantity, and total potential reward equals reward per unit multiplied by quantity.

What is an R multiple?

An R multiple expresses a planned or realised outcome relative to the initial risk. The entry-to-stop distance is 1R. A target twice that distance is 2R. After a trade closes, realised R uses the actual exit rather than the target.

What is the difference between planned and realised R?

Planned R uses the target selected before entry. Realised R uses the actual exit price after the trade. Partial exits, stop changes, slippage, gaps and costs can make realised R different from the planned value.

How is break-even win rate calculated?

Ignoring costs, break-even win rate equals risk divided by risk plus reward. A 1:2 setup has a simplified break-even rate of about 33.33%, while a 1:3 setup has 25%. This assumes average realised wins and losses match the planned values over many trades.

Is risk-reward the same as position sizing?

No. Risk-reward compares entry, stop and target. Position sizing calculates how many units to trade from account capital, risk percentage and stop distance. Use the Position Size Calculator to calculate quantity.

Do brokerage, slippage and gaps affect the result?

Yes. Brokerage, taxes and spread reduce net reward and can increase the effective cost of a losing trade. Slippage and gaps can also produce an exit beyond the stop. The basic calculator shows gross planned values, not guaranteed net outcomes.

Can a risk-reward ratio guarantee a profitable trade?

No. The ratio does not predict market direction or the probability of reaching the target. Profitability depends on realised win rate, average realised payoff, execution, costs and strategy expectancy.

Is the QbarTrade Risk-Reward Calculator free?

Yes. The calculator is available without signup. QbarTrade may offer an optional workflow for saving the planned levels and reviewing the completed trade.

Plan the ratio, then review the actual trade in QbarTrade

A planned ratio is useful only when it remains connected to execution. Save your entry, stop loss, target and trade thesis in QbarTrade before entering.

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Educational estimate only: This calculator is an educational planning tool. It uses the entry, stop-loss, target and quantity values you provide and does not recommend trades, predict outcomes or guarantee that a stop will fill at the selected price. Results are gross estimates before brokerage, taxes, spread, slippage, gaps and other execution costs. Traders remain responsible for their own decisions and risk.

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