Risk/Reward Ratio Calculator
Evaluate trade quality by calculating the risk-to-reward ratio, break-even win rate, and expected value.
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Understanding Risk/Reward Ratio
The risk-to-reward ratio (R:R) compares the potential loss of a trade to its potential profit. It is one of the most important metrics for evaluating trade quality before entering a position.
How It Works
A 1:2 risk-to-reward ratio means you are risking $1 to potentially make $2. With this ratio, you only need to win 33.3% of your trades to break even. Most professional traders aim for a minimum of 1:2 R:R.
Break-Even Win Rate
The break-even win rate tells you the minimum percentage of trades you need to win to be profitable at a given R:R ratio. The formula is: Break-Even Win Rate = 1 / (1 + R:R Ratio). Higher R:R ratios require lower win rates to be profitable.
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