Calculate risk-reward ratio for trades. Evaluate if trade setups meet your criteria with precise risk-reward analysis.
Price at which you'll exit to limit loss
Price at which you'll take profit
Risk:Reward Ratio
1:4.00
Risk
₹5.00
Reward
₹20.00
✓ Good risk-reward ratio (1:2 or better)
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A Risk-Reward Calculator helps traders evaluate whether a trade is worth taking by calculating the ratio between potential profit (reward) and potential loss (risk). Professional traders only take trades with favorable risk-reward ratios, typically 1:2 or better (risking ₹1 to make ₹2+). This calculator uses your entry price, target price, and stop loss to compute the risk-reward ratio. A trade with 1:3 risk-reward means you're risking ₹1 to potentially make ₹3 - excellent odds! Even with 50% win rate, a 1:2 ratio makes you profitable long-term. This tool is essential for trade selection and maintaining positive expectancy.
Minimum 1:2 for most trading strategies. Professionals target 1:2.5 to 1:3. Day traders might accept 1:1.5 with high win rates. Swing traders should aim for 1:2.5+. Never take trades below 1:1.5 unless win rate is 70%+. Remember: Higher R:R means you can be wrong more often and still profit. A 1:3 ratio with 40% win rate beats 1:1 ratio with 60% win rate.
Theoretically great, but practically difficult. Higher R:R usually means: 1) Lower win rate (target too far), 2) Longer holding time, 3) May miss smaller profitable moves. A 1:5 ratio sounds amazing but if it hits only 10% of time, it's not profitable. Sweet spot for most traders: 1:2 to 1:3 with 40-50% win rate. Balance R:R with probability of success.
Yes! With better R:R, you can risk slightly more. Example: 1:1.5 ratio → risk 1% per trade. 1:3 ratio → comfortable risking 2% per trade. But NEVER exceed 3% risk on single trade regardless of R:R. Better R:R gives you margin of safety for being wrong more often, making position sizing less critical, but discipline still matters.
Look for: 1) Clear support/resistance levels (tight stops near support, targets at resistance), 2) Chart patterns with defined targets, 3) Oversold stocks bouncing from support, 4) Breakouts with stops below breakout level. Avoid: Mid-range entries with no clear support/resistance. Wait for price to come to supply/demand zones where stops can be tight and targets are far.
No! Use trailing stops or time-based exits. If trade isn't working after reasonable time (1-2 weeks for swing trades), exit even if not at target. Don't be greedy. Example: Entered at ₹100, target ₹115 (1:3), price reaches ₹112 and reverses. Trail stop to ₹110, book ₹10 profit (still 1:2 achieved). Partial R:R is better than turning winners into losers by holding too long.
No, it's ONE part of system. Also need: 1) Proper entry timing, 2) Accurate technical/fundamental analysis, 3) Discipline to follow stops, 4) Reasonable win rate. A 1:3 R:R doesn't help if your stop gets hit 90% of time. Combine good R:R with quality setups, backtested strategy, and disciplined execution. R:R is necessary but not sufficient for success.
Only if logical! Don't arbitrarily widen stops to make R:R look better - this increases risk. Place stops at technical levels (support, moving averages). If stop level gives poor R:R, the trade setup itself is bad - skip it! Example: Logical stop is 5% away but target only 3% away (1:0.6 ratio). Don't widen stop to 10% for 1:0.3 ratio - that's worse! Find better setup instead.
They FILTER trades! Setup analysis → Calculate R:R → If < 1:2, reject trade immediately → Only execute when R:R ≥ 1:2 AND other criteria met. They plan three exits: 1) Stop loss (risk), 2) First target (1.5-2R), 3) Extended target (3R+), often booking partial profits at each level. This systematic approach ensures only high-quality setups are traded, dramatically improving overall profitability.