Risk-Reward Ratio Calculator
Key Takeaway
A risk-reward ratio of 1:3 means you risk ₹1 to potentially earn ₹3. Professional traders target a minimum 1:2 ratio , even with a 40% win rate, this ratio produces net-positive returns over time.
Risk-Reward Ratio Calculator
Evaluate the mathematical expectancy of your trade setups.
Risk : Reward Ratio
1 : 3.00
What to do next
Based on your Risk-Reward Ratio Calculator, here are the tools you should try next:
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Trade Risk-to-Reward Ratio Formula
Calculates ratio of potential gains relative to potential losses on a structured trade setup.
Worked Example: Buy entry at ₹400, Stop Loss at ₹380, Target at ₹460
Risk-Reward Ratios: Trading setups with positive mathematical expectations
Vijay was evaluating a trade setup. The stock was trading at ₹400. He planned to place a stop loss at ₹380 and a profit target at ₹460. He wanted to check the risk profile.
His risk was ₹20, and his potential reward was ₹60, representing a risk-to-reward ratio of 1 : 3. By only taking trades with a ratio of 1:2 or higher, Vijay set up a positive expectancy.
The risk-reward ratio compares potential losses against potential gains of a trade. A ratio of 1:3 means you win 3 times what you risk.
With a 1:3 ratio, you only need a 30% win rate to remain profitable over time, taking the pressure off finding 'perfect' setups.
Frequently Asked Questions
What is a good risk-reward ratio?
A ratio of 1:2 or higher is generally recommended. This means your potential profit is at least twice as large as your potential loss.
Can I be profitable with a low win rate?
Yes. If your risk-reward ratio is high (e.g., 1:3), you only need to win 30% of your trades to be profitable over the long run.
Why do beginners fail with risk-reward?
Beginners often take small profits early and let losing trades run, creating an inverted risk-reward ratio (e.g., risking ₹3 to make ₹1), which mathematically guarantees long-term ruin.
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