Risk-Reward Calculator
Evaluate trade quality before entry. Calculate risk-reward ratio, minimum win rate required, and estimated dollar P&L for any forex trade setup.
Trade Quality Tool
Risk-Reward Calculator
Auto-Set TP by R:R
Trade Analysis
Risk-Reward Ratio
1 : 2.00
Good Quality Trade
Risk Amount
$100.00
50.0 pips
Reward Target
$200.00
100.0 pips
Minimum Win Rate to Break Even
33.3%
win rate needed
At 1:2.00, you break even winning 33.3% of trades
Poor
Marginal
Acceptable
Good
Excellent
For educational purposes only. Not financial advice. Always use proper risk management.
What Is the Risk-Reward Ratio?
The risk-reward ratio (R:R) compares the potential loss of a trade to its potential profit. A 1:2 ratio means you risk $1 to make $2. It is one of the most critical metrics institutional traders evaluate before entering any position.
Professional prop trading firms and hedge funds typically require a minimum 1:2 ratio for trade approval. At 1:2, you only need to win 34% of your trades to break even — giving you enormous statistical margin.
1:1
Min Win Rate: 50%
Marginal
1:2
Min Win Rate: 34%
Good
1:3
Min Win Rate: 25%
Excellent
Why Institutional Traders Filter by R:R
Institutional desks don't just ask "will this trade win?" — they ask "is this trade mathematically worth taking?" A strong edge means nothing if the risk-reward is poor.
Consider two strategies: Strategy A wins 60% of trades at 1:0.8 R:R, and Strategy B wins 40% at 1:3. Strategy B is far more profitable over 100 trades despite lower accuracy. This counterintuitive math is why R:R filtering is non-negotiable at the professional level.
By filtering out trades below your minimum R:R threshold before entry, you create a systematic process that removes emotion from trade selection and improves expected value over time.
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Frequently Asked Questions
What is a good risk-reward ratio in forex?
Most professional traders use a minimum of 1:2. This means risking $1 to potentially earn $2. At 1:2, you only need a 34% win rate to break even. Elite traders often target 1:3 or higher, enabling profitability even with win rates below 30%.
How do I calculate risk-reward ratio?
Divide your potential reward (entry to take profit, in pips) by your potential risk (entry to stop loss, in pips). Example: 50 pip stop loss, 100 pip take profit = 1:2 risk-reward ratio.
What is the minimum win rate I need to be profitable?
At 1:1 R:R you need >50% win rate. At 1:2 R:R you need >33%. At 1:3 R:R you need >25%. The higher your R:R, the less often you need to be right. This is why many professionals focus more on R:R selection than signal accuracy.
Should I always use a 1:2 R:R?
While 1:2 is the standard minimum, the optimal R:R depends on your strategy's historical win rate. Scalpers with high win rates can operate profitably at 1:1. Swing traders often need 1:3+ to compensate for lower trade frequency and accuracy.
How does R:R relate to position sizing?
R:R determines if a trade is worth taking. Position sizing determines how much capital to risk on it. Used together: first filter trades by minimum R:R, then apply fixed fractional position sizing. This combination forms the foundation of professional capital management.