Risk-Reward Ratio Calculator for Smarter Trading Decisions
Successful traders know that consistent profits come from managing risk — not just picking winners. The risk-reward ratio is a crucial metric that helps you evaluate trades objectively before placing them.
What Is the Risk-Reward Ratio?
This ratio compares how much you're risking versus how much you could gain in a trade. It's foundational in any strategy, whether you're trading Indian stocks, U.S. equities, or crypto.
Risk-Reward Formula
Risk-Reward Ratio = (Target Price - Entry Price) ÷ (Entry Price - Stop Loss Price)
Or simply: Potential Profit ÷ Potential Loss
Why This Ratio Matters
- You can be wrong 50% of the time and still be profitable if your risk-reward is favorable.
- Prevents emotional decision-making by defining exits upfront.
- Helps filter bad trades — if the numbers don’t make sense, skip the trade.
How to Calculate It – Step-by-Step
- Entry: Buy Reliance at ₹2,500
- Stop-loss: ₹2,450 (₹50 risk)
- Target: ₹2,650 (₹150 reward)
- Risk-reward: ₹150 ÷ ₹50 = 1:3 ratio
💡 Pro Tip: Aim for at least a 1:2 ratio. It ensures your reward outweighs your risk.
Common Mistakes Traders Make
- Arbitrary numbers: Use technical levels, not round figures.
- Ignoring volatility: Choppy markets need wider stops.
- Changing plans mid-trade: Stick to your strategy unless the market context changes.
Use Our Calculator for Instant Results
Manually crunching these numbers can slow you down. Our free tool helps you:
- Input entry price
- Set risk amount or %
- Choose your reward multiple
- Get calculated stop-loss and target levels
Risk-Reward Ratio FAQs
Most traders recommend at least 1:2. In trending markets, 1:3 or higher is common.
With a 1:3 ratio, winning just 30% of your trades can still be profitable.
Use a minimum ratio (e.g., 1:2) but adjust it based on volatility and trade type.
Set them below support (longs) or above resistance (shorts). Let our tool help you fine-tune.
Yes. Risk-reward is even more critical in fast-paced, intraday environments.
Take Control of Your Trading Today
- Calculate your ratio before any trade
- Stick to your exit plan unless new fundamentals emerge
- Let our calculator handle the math
Ready to plan better trades? Use our Risk-Reward Calculator now!