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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.
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.
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.Step 1: Enter entry price with the timeframe/context you want to evaluate.
- 2.Step 2: Enter stop price with the timeframe/context you want to evaluate.
- 3.Step 3: Enter target price with the timeframe/context you want to evaluate.
- 4.Step 4: Apply formula Risk/Reward = (Entry - Stop) / (Target - Entry).
- 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.
Related tools
Stop Loss Calculator→Take Profit Calculator→Position Size Calculator→Price Target Upside Calculator→
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