Risk-Reward Ratio Calculator

Risk-Reward Ratio Calculator – R Multiple, Position Size and Win Rate

The Risk-Reward Ratio Calculator helps you quantify the balance between potential loss and potential gain on a trade. Instead of guessing whether a setup is “good enough,” you can measure its R multiple, size the position from your risk rules, evaluate expectancy and see what win rate is needed to break even or grow your account.

Risk-reward math is at the core of every trading strategy. Even with a modest win rate, a high enough reward-to-risk ratio can produce a profitable system. On the other hand, a high win rate strategy with poor risk-reward can quickly fail when markets change. This calculator brings together the most important pieces: risk, reward, position size, expectancy and portfolio risk allocation.

How the Risk-Reward Ratio Calculator Works

The calculator is divided into five practical modes:

• Risk-Reward Ratio: Compute risk, reward, R multiple and risk as a percentage of account for a single setup.
• Position Size: Determine maximum units based on account size, risk percentage and stop distance.
• Expectancy: Model long-run average performance using win rate, R multiple and risk per trade.
• Break-Even Win Rate: Find the win rate needed so the strategy neither wins nor loses over time.
• Portfolio Risk Allocation: Link strategy-level risk to total portfolio value and concurrent trades.

You can use each mode independently or combine them to design a coherent risk plan that matches your style and risk tolerance.

Mode 1: Risk-Reward Ratio (R Multiple)

The Risk-Reward Ratio mode focuses on a single trade setup. You enter your entry price, stop-loss price and take-profit price, plus an optional position size and account size.

Formulas for Risk, Reward and R

From these, total risk and reward are:

The R multiple is:

If you also enter account size, the calculator shows risk per trade as a percentage of your account. This makes it easy to see whether a setup fits your risk rules before placing the trade.

Mode 2: Position Size Based on Risk Percentage

The Position Size mode answers the key question: “How many units can I trade if I only want to risk a fixed percentage of my account?” Instead of eyeballing position size, you can compute it directly from account size, risk percentage and stop distance.

Position Size Formula

The calculator rounds position size down to a whole unit and shows the actual dollar risk, actual risk percentage and notional trade value (entry price × position size). This helps keep risk consistent even when volatility or price changes.

Mode 3: Trading Expectancy

The Expectancy mode models long-run performance. It uses your win rate, reward-to-risk ratio and risk per trade to calculate how much you might gain or lose on average per trade, and how that compounds over a chosen number of trades.

Expectancy in R and Percent

Here, WinRate is expressed as a decimal (for example, 55% becomes 0.55). This tells you the average R per trade. To translate this into a percentage of equity, multiply by the risk percentage:

If expectancy is positive, the strategy has a theoretical edge over many trades. The calculator then uses this expectancy percentage to approximate total expected return over the number of trades you enter, using a simple compounding assumption.

Mode 4: Break-Even Win Rate

The Break-Even Win Rate mode shows how often you need to win to avoid losing money, given a certain reward-to-risk ratio and optional cost adjustment. This helps you see whether your target R multiple is realistic for your actual win rate.

Break-Even Win Rate Formula

If we ignore costs, the approximate break-even win rate is:

Expressed as a percentage, this is multiplied by 100. For example, at 2R, break-even win rate is about 33.3%. The calculator also allows you to include costs as a small percentage of the risk, which nudges the break-even win rate slightly higher.

Mode 5: Portfolio Risk Allocation

The Portfolio Risk Allocation mode connects strategy-level decisions to your overall portfolio. Instead of only thinking about risk per trade within a single account, you can see how a strategy and its concurrent trades affect total portfolio exposure.

Portfolio Risk Allocation Formulas

This shows how much of your entire portfolio is at risk if multiple trades from the same strategy are open at once, helping you avoid excessive concentration in a single approach.

Why Risk-Reward and Expectancy Matter

Many traders focus on entry signals and ignore the math behind risk and reward. Yet over the long term, what matters most is how much you win when you are right, how much you lose when you are wrong and how often each outcome happens. Risk-reward ratio and expectancy put these elements into a clear framework.

Working with these metrics can help you:

• Filter out trades with poor reward potential relative to risk.
• Keep position sizes consistent across different instruments.
• Understand whether a strategy has a positive theoretical edge.
• Set realistic expectations for win rate and account growth.
• Align trade-level risk with overall portfolio risk tolerance.

Examples of Risk-Reward and Expectancy Calculations

Example 1: Basic Risk-Reward Calculation

You plan a long trade with entry at $100, stop at $97 and take-profit at $106. Risk per unit is $3, reward per unit is $6. The risk-reward ratio is 1:2, or 2R. If you trade 100 units, you risk $300 to potentially make $600.

Example 2: Position Size from 1% Risk

Your account size is $20,000 and you risk 1% per trade. Entry is $50 and stop is $48.5, so risk per unit is $1.5. Account risk amount is $200. Position size is $200 ÷ $1.5 ≈ 133 units. The calculator outputs 133 units, dollar risk and notional trade value.

Example 3: Expectancy with 50% Win Rate and 2R

With a 50% win rate and 2R reward-to-risk, expectancy in R is 0.5 × 2 − 0.5 × 1 = 0.5R per trade. Risking 1% of equity per trade gives an expectancy of about 0.5% per trade. Over many trades, this edge can compound significantly if the assumptions hold.

Example 4: Break-Even Win Rate at 3R

If your average winner makes three times what you risk (3R), the break-even win rate is around 1 ÷ (1 + 3) = 25%. This means that winning only one out of four trades could theoretically keep you at break-even before costs.

Example 5: Portfolio Risk Allocation

Suppose your total portfolio is $50,000 and you allocate 40% ($20,000) to an active trading strategy. You risk 1% per trade of strategy capital ($200) and run four trades at once. Aggregate strategy risk is $800, which is 1.6% of the total portfolio. The calculator shows all of these values so you can judge whether this exposure is acceptable.

How to Use This Tool Effectively

• Start in the Risk-Reward Ratio tab to evaluate individual trade ideas.
• Use the Position Size tab to enforce consistent risk per trade.
• Experiment in the Expectancy tab to understand how win rate and R multiple interact.
• Check the Break-Even Win Rate tab when designing new strategies or adjusting targets.
• Use the Portfolio Risk Allocation tab to align strategy risk with overall portfolio limits.
• Compare real trading results with these theoretical metrics to refine your approach over time.

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