Risk-Reward Ratio Calculator
Evaluate the risk-to-reward profile of your trade setup and discover the minimum required win rate to maintain profitability.
How the Risk-Reward Ratio Works
Before you take a trade, you know three prices: where you enter, where you will take profit, and where your stop loss is. Together they tell you how much you can lose, how much you can make, and how often the trade has to work to be worth taking.
Reward : Risk = Reward / Risk Break-even Win Rate = 1 / (1 + Reward/Risk) × 100
Example: entry ₹1,500, target ₹1,560, stop loss ₹1,475. You risk ₹25 a share to make ₹60, a ratio of 1 : 2.4. On 100 shares that is ₹2,500 at risk for ₹6,000 of reward, and the trade idea breaks even if it wins 29.4% of the time.
| Reward : Risk | Break-even win rate (before charges) |
|---|---|
| 1 : 1 | 50.0% |
| 1 : 1.5 | 40.0% |
| 1 : 2 | 33.3% |
| 1 : 3 | 25.0% |
A ratio is only half the picture: you also need the win rate. A backtest on past NSE data shows both for your own rules, after charges.
- 1Risk ₹25 a share
- 2Reward ₹60 a share
- 3Ratio 1 : 2.4
- 4On 100 shares: ₹2,500 vs ₹6,000
Frequently Asked Questions
What is a good risk-reward ratio?
It depends on how often your trades win. A 1:2 ratio breaks even at a 33.3% win rate before charges, so it suits a strategy that wins about four times in ten. A strategy that wins most of the time can work with a lower ratio.
How is the break-even win rate calculated?
Break-even win rate = 1 / (1 + reward-to-risk ratio) x 100. At 1:2.4 that is 1 / 3.4 = 29.4%. Below that win rate the strategy loses money, even before charges.
Does the risk-reward calculator include brokerage and taxes?
No. It uses prices only. Charges are paid on every trade, so the real break-even win rate is a little higher, most of all for intraday trades with small targets.
Can I use it for short trades?
Yes. It measures the distance from entry to target and from entry to stop loss, so for a short trade put the target below the entry and the stop loss above it.