⚖️ Risk / Reward Calculator

Risk-Reward Ratio — Complete Guide for Traders

The risk-reward ratio (R:R) measures how much potential profit you get for every rupee you risk. It is the single most important number to calculate before entering any trade — more important than the win rate alone.

How to calculate risk-reward ratio

For a long trade: Risk = Entry − Stop Loss. Reward = Target − Entry. R:R = Reward ÷ Risk.

Example: Entry ₹500, SL ₹480, Target ₹560 → Risk = ₹20, Reward = ₹60 → R:R = 1:3. This is a good trade.

For a short trade: Risk = Stop Loss − Entry, Reward = Entry − Target.

Why 1:2 is the minimum standard

At a 1:2 risk-reward ratio, you break even at a win rate of just 33.3%. That means you can lose 2 out of every 3 trades and still not lose money — as long as your winners are twice your losers. Most professional traders set 1:2 as the minimum before considering any trade.

R:R vs win rate — the real relationship

• 1:1 R:R — need 50%+ win rate to profit
• 1:2 R:R — need only 34%+ win rate to profit
• 1:3 R:R — need only 25%+ win rate to profit
• 1:4 R:R — need only 20%+ win rate to profit

Common mistakes with risk-reward

• Moving the stop loss after entry — this changes your actual R:R mid-trade
• Setting targets at round numbers without checking if support/resistance confirms
• Calculating R:R after entering, not before
• Ignoring charges — brokerage eats into small reward trades