Risk calculator: entry, stop and target into size and reward to risk
Works from prices rather than pips. Gives stop distance, position size for your risk percentage, and the reward to risk ratio, with the win rate each ratio needs to break even.
Enter the prices rather than the pips. From entry, stop and target this works out the stop distance, the position size for your risk percentage, and the reward to risk ratio of the trade you are about to take.
What the reward to risk number means
A ratio of 2 means the target is twice as far as the stop. It is useful, and it is routinely misread: a good ratio does not make a trade good. What matters is the ratio together with how often the target is actually reached.
| Reward to risk | Win rate needed to break even |
|---|---|
| 0.5 | 66.7% |
| 1.0 | 50.0% |
| 1.5 | 40.0% |
| 2.0 | 33.3% |
| 3.0 | 25.0% |
Before costs. Add the spread and any commission and every one of those numbers gets worse, which is the reason a strategy with a great ratio on paper can still lose money.
Placing the stop, not fitting it
The entry and stop you type here should come from the chart: the stop belongs at the price where the reason for the trade is no longer true. Then the size adapts. Typing a stop chosen to produce a comfortable position size is the reverse, and it is how ordinary market noise ends up hitting stops that were never in a meaningful place. See risk management.
What this does not account for
- Spread. A long position opens at the ask and closes at the bid, so the effective stop is slightly further than the price difference suggests.
- Slippage. A stop order guarantees exit, not price.
- Gaps. Over a weekend or a major announcement, price can open past your stop and fill on the other side of it.
- Swap. Positions held past the daily rollover are charged or credited financing.
All four make the real risk slightly higher than the calculated figure. That is a reason to leave margin for error, not a reason to skip the calculation.
Related
- Position size calculator: from a stop already measured in pips.
- Pip calculator.
- Risk management.
Frequently asked questions
What reward to risk ratio should I aim for?
There is no correct number on its own. A ratio of 1 needs a 50% win rate to break even, a ratio of 2 needs 33%, and a ratio of 0.5 needs 67%. All of those get worse once spread and commission are included, so the ratio only means something alongside how often the target is actually reached.
Does this include the spread?
No. A long position opens at the ask and closes at the bid, so the effective stop is slightly further than the price difference suggests. Slippage, weekend gaps and swap also make real risk a little higher than the calculated figure.
Should I choose the stop price to get the position size I want?
No, that is the reverse of the correct order. The stop belongs where the reason for the trade stops being true, and the size adapts to it. A stop chosen to fit a size sits at a meaningless price and gets hit by ordinary noise.
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