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Risk/Reward Ratio Calculator

Calculate risk/reward from entry, stop, and target.

Evaluate trade structure quality by comparing downside risk per share versus upside reward per share.

Inputs

Results

Reward to risk

2.50 : 1

Risk is $4.00 per share for $10.00 potential reward.

Risk per share
$4.00
Reward per share
$10.00
Risk/Reward
0.40 : 1
Reward/Risk
2.50 : 1

Formula

Risk/Reward = (Entry - Stop) / (Target - Entry)

Example

  • Entry price: 40
  • Stop price: 36
  • Target price: 50

What does this mean?

  • •Lower risk/reward ratio (e.g. 1:2+) can improve expectancy.
  • •Invalid setups (stop above entry or target below entry) need rework.
  • •Use ratio with win-rate assumptions.

Only take setups where math makes sense

Measure setup quality before committing capital.

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What is a risk/reward ratio?

Evaluate trade structure quality by comparing downside risk per share versus upside reward per share. In practice, this means you can quantify risk/reward ratio using entry price, stop price, and target price without relying on hidden assumptions or black-box scoring.

Primary input set for this calculator: Entry price, Stop price, Target price.

How to calculate risk/reward ratio

  1. 1.Step 1: Enter entry price with the timeframe/context you want to evaluate.
  2. 2.Step 2: Enter stop price with the timeframe/context you want to evaluate.
  3. 3.Step 3: Enter target price with the timeframe/context you want to evaluate.
  4. 4.Step 4: Apply formula Risk/Reward = (Entry - Stop) / (Target - Entry).
  5. 5.Step 5: Interpret output together with risk, liquidity, and catalyst context.

Why this metric matters

This metric turns trade assumptions into explicit numbers for sizing, entry/exit planning, and portfolio discipline.

Pair this calculator with catalyst context from headlines, filings, and options flow to avoid relying on isolated numbers.

When to use this calculator

  • ✓Before opening a new position where risk/reward ratio impacts sizing or risk.
  • ✓After a catalyst to quantify how much conditions changed versus your baseline.
  • ✓When comparing setups across multiple tickers with one consistent formula.
  • ✓During weekly review to keep decision-making tied to measurable inputs.

Common scenarios

Lower risk/reward ratio (e.g. 1:2+) can improve expectancy

Use this risk/reward ratio workflow to quantify this scenario with deterministic inputs.

Invalid setups (stop above entry or target below entry) need rework

Use this risk/reward ratio workflow to quantify this scenario with deterministic inputs.

Use ratio with win-rate assumptions

Use this risk/reward ratio workflow to quantify this scenario with deterministic inputs.

Event reaction review

Recalculate risk/reward ratio immediately after earnings, filings, or macro headlines.

Interpretation tips

  • •Re-run risk/reward ratio whenever key inputs change materially, not only when price moves.
  • •Document assumptions so the same methodology can be repeated across watchlist names.
  • •Use this metric as one layer in the decision stack, not as a standalone trade trigger.

Data caveats

  • –Outputs are deterministic from your inputs; input quality determines output quality.
  • –This page does not auto-adjust for broker fees, taxes, or slippage unless you include them in your assumptions.
  • –Validate corporate action details, filing dates, and data freshness before acting on results.

FAQ

How does the risk/reward ratio calculator work?

Risk/Reward Ratio Calculator is deterministic and uses only your inputs (entry price, stop price, target price). Formula: Risk/Reward = (Entry - Stop) / (Target - Entry).

What does this output tell me in practice?

Calculate risk/reward from entry, stop, and target. Pair this with a stop-loss and thesis review, not just return math.

Does the risk/reward ratio calculator use real-time market feeds?

No. This page does not auto-pull live data. You control all inputs and can rerun instantly as market conditions change.

Can I use this result directly for trading decisions?

Use it as a planning layer. Combine with position sizing, liquidity, and catalyst context before any execution.

Disclaimer: This calculator is for educational purposes and does not constitute financial advice. Verify assumptions with official filings, broker statements, and your own risk framework.

After the calculation

Understand what caused the move.

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