Risk Reward Ratio Calculator
Compare a long setup’s target and stop, then calculate its reward to risk ratio, break even win rate, and binary Kelly percentage.
Earlier editorial review
- Reviewed
- 2026-09-25
- Methodology
- 1.1
Sources
How the calculation works
Enter entry price, target price, stop price, and an estimated win rate. The model describes one long unit: target above entry and stop below entry. Reward per unit is target minus entry; planned risk per unit is entry minus stop.
The reward to risk ratio is reward divided by planned risk. The break even win rate is 100 divided by one plus that ratio. It is the probability at which expected gain equals expected loss before costs for the fixed binary outcomes.
The Kelly percentage combines the entered win rate with the reward to risk ratio. It uses percentage points consistently. The estimate can be negative, which is a mathematical result under the inputs, not a short trade or suggested allocation.
Planned risk is the entered entry price minus stop price per unit. It is not a guaranteed maximum loss because execution can differ from the stop level. The calculator does not submit or monitor orders.
Step by step
- Enter a positive entry price, a higher target, a lower stop, and an estimated win rate from 0% to 100%.
- Review reward per unit, planned risk per unit, the reward to risk ratio, and the break even win rate.
- Read Kelly as a binary model calculation under the entered assumptions, not as a trade instruction or allocation.
Worked example
For a long setup with entry 50, target 59, and stop 47, the potential reward per unit is 9 and the planned risk per unit is 3. Reward divided by risk is 3.00.
With an estimated win probability of 40%, the break even win rate is 25% and the binary Kelly calculation is 20%. The inputs and results use the same price unit.
When to use this calculator
Use this calculator to compare the entered target and stop distances for a long setup and to see the corresponding break even win rate and binary Kelly result.
Use one price unit consistently for entry, target, and stop. Assess probability, execution, costs, and portfolio exposure separately from these payoff calculations.
Common interpretation errors
A stop price does not guarantee an exit at that price. A gap or slippage can make the realized loss larger than the planned price difference.
An estimated win rate is an input, not a measured or verified probability. A payoff ratio alone cannot establish a positive expected result.
Formulas
reward = target_price − entry_price
risk = entry_price − stop_price
RRR = reward / risk
Kelly percent = p − (100 − p) / RRR
Break even win rate percent = 100 / (1 + RRR)
p = estimated win probability in percent points, from 0 to 100
All price values must use the same unit. The binary Kelly calculation assumes repeated independent outcomes with fixed win probability and fixed reward and risk. The formula does not include costs or verify that the estimated probability is accurate.
Limitations and assumptions
This is a one unit long trade model with fixed entry, target, and stop outcomes. It does not model partial exits, changing payoff sizes, short trades, options, leverage, order execution, or trade monitoring.
Key terms
- Reward to risk ratio
- Potential reward per unit divided by planned risk per unit. No single value is universally favorable.
- Binary Kelly percentage
- For a repeated binary outcome with fixed odds, Kelly gives the fraction that maximizes expected logarithmic growth under the assumed probability. A negative value is a mathematical result, not a short position or allocation instruction.
- Break even win rate
- The win probability that makes expected gain equal expected loss before costs when the entered reward and risk are fixed.
Related calculations
Use Position Sizing to translate a separate loss budget into shares. Trailing Stop Loss explains how a moving stop level changes the planned exit price.
Maximum Drawdown summarizes a past portfolio decline. These tools answer different questions; none verifies the win probability entered here.
FAQ
What does the reward to risk ratio describe?
It compares potential reward per unit with planned risk per unit. For a ratio of 3.00, reward is three times the entered price difference to the stop. The ratio alone does not show whether a trade has positive expected value because that also depends on the win probability and realized exits.
What is the break even win rate?
It is the win probability at which expected gain and expected loss balance before costs, assuming each outcome matches the entered target or stop. At a reward to risk ratio of 2.00, break even is 33.33%. Costs or different exit sizes change the required probability.
Does a higher reward to risk ratio make a trade better?
Not by itself. A farther target can reduce the chance of reaching it, and the calculator does not estimate that probability. A ratio describes the entered price distances, not trade quality or expected performance.
How should I interpret a negative Kelly result?
It means the binary Kelly formula returns a negative fraction for the entered probability and payoff ratio. It is not a recommendation to short, skip, or change position size. The result is sensitive to estimated probabilities and omits trading costs and other outcomes.
Does the stop price cap my loss?
No. The calculator shows the planned price difference per unit. A stop may execute at a different price during gaps, fast markets, or low liquidity, and fees can add to a realized loss.
Related tools
Position Sizing calculates share quantity from a separate risk budget. Trailing Stop Loss covers moving exit levels, and Maximum Drawdown summarizes declines in a portfolio history.