Stock Risk Reward Calculator
Enter a planned stock entry, stop and target. The calculator shows how much reward you are targeting for each dollar of planned risk—without pretending the target is likely or the stop price is guaranteed.
Reward for each $1 risk
1.00 : 1
A 1.00R target with a 50.00% break-even win rate before costs
- Risk per share
- $1.00
- Reward per share
- $1.00
- Stop distance
- 0.61%
- Target distance
- 0.61%
- Planned loss
- $100.00
- Planned profit
- $100.00
- Break-even win rate
- 50.00%
- Direction
- Long
Your prices in the formula
Reward-to-risk divides the target distance by the stop distance. Break-even win rate assumes every win reaches the entered target and every loss exits at the entered stop.
($165.71 − $164.71) ÷ ($164.71 − $163.71) = 1.00R
$1.00 ÷ ($1.00 + $1.00) = 50.00%
Price order
- Target
- $165.71
- Entry
- $164.71
- Stop
- $163.71
Check the formula and primary sources. Before commissions, spread, slippage, tax, gaps and partial exits. A stop trigger is not a guaranteed execution price.
The ratio works—how many shares fit your risk budget?
Reward-to-risk compares price distances. It does not decide how much of your account to expose.
Carry the entry and stop into the Stock Position Size Calculator, then choose your own account-level dollar or percentage risk budget.
Calculate stock position sizeHow to calculate risk reward
Choose long or short
A long trade risks a fall from entry to stop and targets a rise. A short trade reverses that price order.
Measure risk per share
For a long trade, risk is entry minus stop. For a short trade, risk is stop minus entry.
Measure reward per share
For a long trade, reward is target minus entry. For a short trade, reward is entry minus target.
Divide reward by risk
A $3 target distance divided by a $1 stop distance is 3.00R, commonly written as a 1:3 risk-reward ratio.
Risk reward ratio formula
This page reports reward relative to one unit of risk. Some pages reverse the order and call the same setup a reward/risk ratio of 3 or a risk/reward ratio of 1:3. The labels here always spell out which side is which.
Long reward-to-risk = (target − entry) ÷ (entry − stop)
Short reward-to-risk = (entry − target) ÷ (stop − entry)
What break-even win rate means
The mathematical break-even rate is risk ÷ (risk + reward), equivalent to 1 ÷ (1 + R). At 3R it is 25%. That is not a predicted win rate: it assumes each winner reaches the full target, each loser realizes the planned risk, and there are no trading costs.
A higher ratio is not automatically a better trade
Moving a target farther away raises the displayed ratio but may make the target harder to reach. Tightening a stop also raises the ratio but may increase how often the stop triggers. Only evidence from the strategy and setup can connect a planned ratio to outcome probabilities.
Planned loss is not guaranteed maximum loss
Investor.gov explains that a stop order normally becomes a market order once triggered. In a fast market or overnight gap, execution may occur at a materially different price. A stop-limit order controls price but may not execute.
What this calculator covers
It models one long or short stock trade from prices you enter. It does not fetch quotes, choose a stop or target, predict probability, model options, margin, borrowing, dividends, portfolio correlation, or execution quality.
Worked stock risk-reward examples
The first case reproduces a published Interactive Brokers stock bracket example. The other cases show how the arithmetic changes.
- Interactive Brokers example. A long entry at $164.71, stop at $163.71 and target at $165.71 has $1.00 risk, $1.00 reward, a 1.00 : 1 reward-to-risk result and a 50.00% break-even win rate before costs.
- Three-to-one target. A long entry at $50, stop at $48 and target at $56 risks $2 to target $6. The result is 3.00R and the mathematical break-even win rate is 25% before costs.
- Short trade. A short entry at $80, stop at $84 and target at $68 risks $4 and targets $12 per share. The result is also 3.00R.
- With shares. Add 100 shares to the $50 / $48 / $56 long setup and the planned amounts become $200 loss and $600 profit, assuming those exact exit prices.
- Costs matter. A displayed 50% break-even rate at 1R becomes insufficient when average losses, spread, slippage and commissions exceed the idealized amounts.
Verified against an Interactive Brokers stock example
Interactive Brokers publishes a bracket-order example with a buy fill at $164.71, a $165.71 profit taker and a $163.71 stop. The same figures produce:
- Risk per share: $164.71 − $163.71 = $1.00.
- Reward per share: $165.71 − $164.71 = $1.00.
- Reward-to-risk: $1.00 ÷ $1.00 = 1.00 : 1.
- Break-even win rate: $1 ÷ ($1 + $1) = 50.00% before costs.
Interactive Brokers Campus — Profit-Taking — the primary source for the stock prices used above.
Checked 28 July 2026. Interactive Brokers supplied the public teaching example; it has not reviewed or endorsed CalcStocks. The comparison verifies arithmetic, not whether the trade is suitable.
Risk-reward ratio questions
Formula, ratio notation, long and short setups, break-even win rate, execution limits and privacy.
Formula
How do you calculate risk reward?
Measure the price distance from entry to stop, then measure the distance from entry to target. Divide reward by risk. A $3 target distance and $1 stop distance produce 3.00R, also written as a 1:3 risk-reward ratio.
What is the risk reward formula for a long stock trade?
Risk is entry minus stop. Reward is target minus entry. Reward-to-risk is (target − entry) divided by (entry − stop). The calculator requires stop below entry and target above entry.
What is the formula for a short stock trade?
Risk is stop minus entry. Reward is entry minus target. Reward-to-risk is (entry − target) divided by (stop − entry). The target must be below entry and the stop above it.
How are potential profit and loss calculated?
When shares are entered, planned loss is risk per share multiplied by shares and planned profit is reward per share multiplied by shares. Both assume exits at the exact entered prices.
Read the result
What does a 1:3 risk reward ratio mean?
It means the plan targets three dollars of reward for each one dollar of risk. CalcStocks displays this as 3.00 : 1 reward-to-risk and 3.00R so the order cannot be mistaken.
What does a 1:1 risk reward ratio mean?
The target and stop are the same price distance from entry. Before costs, the mathematical break-even win rate is 50%. Real trading needs a higher realized rate if costs or slippage are present.
What is a good risk reward ratio?
There is no universal number. A ratio has to be considered with the strategy's realized win rate, target attainment, stop behavior, costs, liquidity and sample size. This calculator deliberately does not label ratios good or bad.
Is a higher risk reward ratio always better?
No. A farther target raises the ratio but may be less likely to fill; a tighter stop also raises it but may trigger more often. The ratio measures payoff distances, not probability or trade quality.
How is break-even win rate calculated?
It is risk divided by risk plus reward, or 1 divided by 1 plus R. At 2R it is 33.33%; at 3R it is 25%. This is before all costs.
Is the break-even win rate a predicted win rate?
No. It is the rate required by idealized arithmetic when average wins and losses equal the entered target and stop distances. It says nothing about how often this setup will actually win.
Can a ratio below 1R be profitable?
Mathematically yes, if the realized win rate and average outcomes are sufficient after costs. For example, 0.5R has a 66.67% idealized break-even win rate. Whether a strategy achieves that is an evidence question.
Stops and costs
Is the stop price a guaranteed exit price?
No. Investor.gov explains that a stop order generally becomes a market order when triggered, and execution can differ significantly from the stop price in a fast market.
What happens if a stock gaps through the stop?
The next available execution may be worse than the entered stop, so realized risk per share can exceed the calculator's planned risk. Overnight news and illiquidity can make this difference material.
Does a stop-limit order guarantee the planned loss?
No. It limits the acceptable execution price, but Investor.gov warns that the order may not execute when the market moves through the limit. Price control trades off against execution certainty.
Are commissions, spread and slippage included?
No. They reduce realized reward or increase realized loss and therefore raise the true break-even win rate. The displayed rate is explicitly before costs.
Does this handle partial profit taking or moving stops?
No. It assumes the full share count exits at one stop or one target. Multiple exits change the average win and loss and should be evaluated from the actual weighted prices.
Does the calculator estimate the chance of reaching the target?
No. Price levels alone contain no reliable probability estimate. That requires strategy evidence, market context and a defensible statistical model outside this arithmetic tool.
Scope and privacy
Does risk reward tell me how many shares to buy?
No. The ratio is unchanged whether the position is one share or one thousand. Use the linked Stock Position Size Calculator to connect entry-to-stop risk with an account-level risk budget.
Can I use this for options, forex, crypto or futures?
This page is designed for stock prices and share quantities. Options premiums and contract multipliers, forex lots, crypto leverage and futures tick values have different mechanics and need instrument-specific tools.
Does the calculator fetch live stock prices?
No. You enter every price. This keeps the formula inspectable and avoids presenting delayed market data as executable.
Are my trade-plan inputs saved or sent to a server?
No. The calculation runs locally in your browser. CalcStocks does not receive the entry, stop, target or shares. A copied share link contains the values, so treat that URL as visible to anyone you give it to.
Is this investment advice?
No. It is transparent arithmetic from assumptions you choose. It does not assess the stock, direction, stop, target, strategy, account, risk tolerance or suitability.
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Method, primary sources, and limitations
Built and maintained by CalcStocks as a browser-only stock arithmetic tool. The formula is visible and the default result is checked against a first-party stock bracket example.
- Interactive Brokers Campus — Profit-Taking — the primary source for the $164.71 stock entry, $165.71 profit target and $163.71 stop used in the default verification.
- Charles Schwab — 5 Elements of a Smart Trade Plan — first-party stock-trading context for defining a target, stop or exit, and risk-to-reward before placing a trade.
- Investor.gov — Stop, Stop-Limit, and Trailing Stop Orders — the primary source for why a stop trigger is not a guaranteed execution price and why stop-limit orders may not execute.
Educational estimate for one stock trade. The result excludes commissions, bid-ask spread, slippage, gaps, taxes, dividends, borrowing, partial exits and probability. Planned profit and loss assume exact fills at the entered target and stop. Nothing here is investment, legal or tax advice.