Decision tool
Risk/reward calculator
Compare the planned price distance to a stop with the potential distance to a target before deciding whether a trade structure merits further review.
Calculator
Compare planned reward with planned risk
Use one currency consistently for entry, stop, and target prices.
Method
Formula and logic
Planned risk per unit is the distance from entry to stop. Potential reward per unit is the distance from entry to target. Reward-to-risk equals reward divided by risk.
Simplified break-even win rate = risk ÷ (risk + reward) × 100. It assumes every outcome is either the full entered win or full entered loss.
Verification
Worked example
A long entry at 100, stop at 95, and target at 115 has 5 units of planned risk and 15 units of potential reward. That is a 3 : 1 reward-to-risk ratio and a 25% simplified break-even win rate before costs.
Boundaries
Limitations
- The tool measures entered price distances; it does not assess target probability or setup quality.
- Commissions, spreads, slippage, gaps, financing, taxes, partial exits, and changing stops are excluded.
- Real outcome distributions are not limited to one full win or one full loss.
Questions
Frequently asked questions
- Is the break-even win rate a probability forecast?
- No. It is the arithmetic rate needed to break even across repeated full wins and full losses of the entered sizes before costs.
- Does a higher ratio mean a better trade?
- Not by itself. The ratio does not estimate whether the target or stop is likely, whether either level is well chosen, or whether execution is available.