Forex Risk/Reward Ratio Calculator

What this calculator does

The risk/reward ratio (RRR) measures how much you stand to gain on a trade versus how much you are risking to find out. This tool reads three prices off your chart — entry, stop-loss (SL), and take-profit (TP) — plus the trade direction (buy or sell), and returns two numbers that matter before you click the button:

• The risk/reward ratio, expressed as 1:R, where R is your reward measured in units of risk (your R-multiple).
• The breakeven win rate — the minimum percentage of trades you must win, at this ratio, just to stop losing money.

It is a pure planning tool: no balance, lot size, or pip value required. Distance from entry to stop is your risk; distance from entry to target is your reward.

The formula

The ratio is the absolute reward distance divided by the absolute risk distance:

RRR = |TP - entry| / |entry - SL|

Using absolute values lets the same formula serve both longs and shorts. For a buy, risk = entry − SL and reward = TP − entry; for a sell, risk = SL − entry and reward = entry − TP. Either way you divide reward by risk.

The breakeven win rate falls straight out of the ratio. To break even, expected value must be zero: winRate x reward = (1 − winRate) x risk. Solving for win rate and substituting R = reward/risk gives the clean form this tool uses:

breakevenWinRate = 1 / (1 + RRR)

Higher RRR means a lower required win rate. That is the whole point of asymmetric trades: you can be wrong more often than you are right and still come out ahead.

Worked example

You go long EURUSD at an entry of 1.1000, with a stop-loss at 1.0950 and a take-profit at 1.1100.

• Risk = entry − SL = 1.1000 − 1.0950 = 0.0050 (50 pips)
• Reward = TP − entry = 1.1100 − 1.1000 = 0.0100 (100 pips)
• RRR = 0.0100 / 0.0050 = 2.0, i.e. 1:2

Now the breakeven win rate:

breakevenWinRate = 1 / (1 + 2.0) = 0.3333 = 33.3%

So at a 1:2 ratio you only need to win about one trade in three to break even. Win more than 33.3% of the time and the strategy is profitable before costs. A 1:3 trade drops the breakeven figure to 25%; a 1:1 trade pushes it back up to 50%.

Edge cases and pitfalls

• A stop-loss at the entry price breaks the math. If SL equals entry, risk is zero and the ratio is undefined (division by zero). Every trade needs a real stop a meaningful distance away — there is no such thing as a free, riskless target.
• The ratio says nothing about probability. A gorgeous 1:5 RRR is worthless if price almost never travels that far before reversing. Breakeven win rate is the floor you must clear; it does not tell you whether your edge actually clears it. Pair this with realistic targets drawn from structure or volatility, not wishful round numbers.
• Costs erode the real ratio. Spread, commission, and overnight swap are paid out of your reward and added to your risk. On tight stops these frictions can quietly turn a 1:2 plan into something closer to 1:1.7, which raises your true breakeven win rate. Calculating on raw spreads keeps the gap between the planned and realized ratio small — one reason scalpers favour NX Pro's raw-spread conditions.

Why traders use a minimum RRR

Most disciplined forex traders treat 1:2 as a floor and reject setups below 1:1 outright. The reason is mechanical, not superstitious: with a low ratio you need a punishing win rate to survive, and a single revenge-trade streak can wipe a month of small wins. Locking a minimum RRR into your plan turns "is this trade worth it?" into a number you check before entry, not a feeling you rationalize after the fact.

FXNX builds these free calculators so you can size and stress-test a trade before risking a cent — then execute it on NX accounts with segregated funds and negative-balance protection.