Break-even win rate
25.0%
The tool
Risk reward ratio calculator
Enter the three prices of a trade — entry, stop and target — and read off the reward-to-risk ratio, the percent of your stake at risk, and the win rate you need to break even. Long or short. Nothing leaves your browser.
Calculate
3.00 : 1 reward-to-risk
Risk per share/unit
2.00
Reward per share/unit
6.00
Risk as % of entry
2.00%
Cash at risk
—
What each output means
Reward-to-risk ratio
The distance from your entry to your target divided by the distance from your entry to your stop. A 3.00 : 1 reading means the trade is structured to win three units for every one it risks. It says nothing about how likely the trade is — only about its shape if it works versus if it fails.
Break-even win rate
The honest companion to the ratio: 1 / (1 + ratio), expressed as a percentage. It is the win rate at which the plan exactly breaks even before costs. A 3:1 ratio breaks even at 25%, a 2:1 at about 33%, a 1:1 at 50%. Your real edge is the gap between your actual win rate and this line.
Risk and reward per unit, and risk as a percent of entry
The raw distances in price terms, plus the stop distance as a share of the entry price. The percentage is what lets you compare the riskiness of two trades on instruments at very different prices.
Position size and cash at risk (optional)
Fill in your account size and the percent you are willing to risk on the trade, and the tool converts that into a number of units and a cash figure, using your stop distance. This is the bridge from a ratio to an actual order — the same arithmetic in the position-sizing guide.
The same calculation, by hand
Worked example
- Pick the trade. Long an index ETF at
entry 100.00,stop 98.00,target 106.00. - Risk per unit. 100.00 minus 98.00 =
2.00. That is also 2.00% of the entry price. - Reward per unit. 106.00 minus 100.00 =
6.00. - Ratio. 6.00 divided by 2.00 =
3.00 : 1. - Break-even win rate. 1 / (1 + 3) =
25%. Win more than a quarter of trades like this and the strategy is positive before costs. - Size it. On a 10,000 account risking 1%, that is 100 of cash at risk; 100 divided by the 2.00 stop distance =
50 units.
The calculator does this for any numbers you give it, long or short, and updates as you type. The point of seeing it written out is to make clear there is no black box — it is one division and one reciprocal.
Why the break-even number matters most
The number a ratio is really telling you
A reward-to-risk ratio is not a verdict on a trade; it is a statement about how often you are allowed to be wrong. Read it backwards and it hands you a break-even win rate — the share of trades you have to win, at that ratio, just to come out flat before costs. The arithmetic is one line: break-even win rate equals one divided by one-plus-ratio. At 1:1 you need to win more than half the time; at 2:1 you can be wrong roughly two times in three and still tread water; at 3:1 a quarter is enough.
That is why a bare win rate is close to meaningless on its own. “I win 80% of my trades” is impressive until you learn each loser is four times the size of each winner — at which point the account bleeds. The calculator on this site shows the break-even win rate next to every ratio for exactly this reason: the two numbers only mean something together. A favourable ratio with a win rate comfortably above its break-even line is an edge; a spectacular win rate at a punishing ratio is a slow leak waiting for a bad streak.
The test to carry away: never judge a ratio without asking what win rate it requires, and never judge a win rate without asking what ratio it was earned at.
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