Compare entry, stop, and target distances, calculate the risk-to-reward ratio, and see the break-even win rate before a simulated trade.
STEP-BY-STEP
How to use this tool
- Select long or short.
- Enter the exact planned entry, stop, and target prices.
- Enter the maximum dollar loss allowed by your plan.
- Add expected commission or other known costs.
- Check the ratio, potential reward, and break-even rate.
- Judge the setup quality separately; a large ratio does not make a poor setup good.
WORKED EXAMPLE
See the calculation in context
An entry at 1.1000, stop at 1.0950, and target at 1.1100 creates 50 pips of risk and 100 pips of potential reward: 1:2. A $250 planned loss corresponds to $500 gross potential reward before costs.
Calculation method
Risk distance is the distance from entry to stop. Reward distance is the distance from entry to target. R:R = reward distance ÷ risk distance. Break-even win rate = 1 ÷ (1 + R:R).
AVOID THESE ERRORS
Common mistakes
- Moving the stop after seeing an unattractive ratio
- Ignoring spreads and fees
- Assuming the target will be filled exactly
- Choosing targets only to manufacture a larger ratio
- Confusing break-even win rate with predicted win probability
FREQUENTLY ASKED
Questions and answers
Is a 1:2 ratio always good?
No. It must be evaluated with realistic execution, setup probability, market conditions and your tested process.
What does break-even win rate mean?
It is the theoretical win rate needed to offset equal-sized losses at the selected ratio before costs.
Should I include partial exits?
This simple tool assumes one target. Advanced planning should model partial exits, stop movement and fees.