Enter your entry, stop loss and take profit to see the risk to reward ratio and the win rate you need to break even.
What the risk reward ratio tells you
The ratio compares what you could gain with what you could lose. A 1 to 3 ratio means you aim to make 3 dollars for every 1 dollar at risk.
Formulas
- Risk = entry minus stop (absolute value).
- Reward = target minus entry (absolute value).
- Ratio = reward ÷ risk.
- Break-even win rate = 1 ÷ (1 + ratio).
Worked example
Buy at 100, stop at 95, target 115. Risk is 5, reward is 15, so the ratio is 3 to 1. You need to win only 25 percent of such trades to break even, before costs.
Using it with Elliott Wave
Entries at the end of wave 2 or wave 4 often offer good ratios, because the stop is close (the invalidation level) and the target is far (the next wave’s Fibonacci target).
Frequently asked questions
What is a good risk reward ratio?
Many traders look for at least 2 to 1, so a winning trade makes twice what a losing trade costs.
What is the break-even win rate?
The share of trades you must win to not lose money at a given ratio. At 2 to 1, it is about 33 percent.
Does the ratio include fees?
No. Spreads and commissions lower the real ratio, so leave some margin.
Results are estimates for education and planning. Check contract specifications and costs with your broker before you trade. Disclaimer.
