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Trading and options · Long and short stock scenarios

Risk-to-Reward Ratio Calculator

Created by Arunangshu DasReviewed

Compare the modeled stop loss and target profit for a stock position you supply.

See how round-trip charges change the multiple and the break-even win rate.

Supplied stock trade

Use the same major currency for all amounts. Enter decimals with a period and no grouping separators.

Formatting only. The calculator performs no currency conversion.

For a long, enter the stop below entry and the target above entry. Reverse the levels for a short. Changing direction clears both exit prices.

Modeled trade outcomes

Enter your trade assumptions or load the worked example.

The break-even rate assumes each trade exits entirely at either the stop or the target. Actual fills and the chance of reaching either exit can differ.

Learn to calculate risk-to-reward

Follow the long and short cash flows and see how fees change the break-even rate.

Read the risk-to-reward guide

Formula and methodology

Net reward-to-risk = signed net target outcome ÷ net stop loss.

Net reward-to-risk = signed net target outcome ÷ net stop loss. Multiply each directional price distance by share quantity. Add round-trip charges to stop loss and subtract the same charges from target profit. When the net target is positive, break-even win rate is net stop loss divided by the sum of net stop loss and net target profit.

Definitions

Gross reward is the profit at the supplied target before charges. Gross risk is the positive loss at the supplied stop before charges. The net multiple divides signed target profit or loss by positive net stop loss.

Verified worked examples

For 10 long shares with entry 50, stop 48, target 54 and charges of 5, gross risk is 20 and gross reward is 40. Net risk is 25 and net reward is 35. The gross multiple is 2×, the net multiple is 1.4× and the break-even win rate is about 41.67%.

Interpretation

A positive net target has a break-even win rate below 100%. A zero net target requires every exit to reach the target. If the target loses money after charges, neither exit breaks even and no combination of the two can break even.

Inputs and interpretation

Choose long or short, supply positive quantity and entry, then enter the stop, target and round-trip charges. Enter zero when assuming no charges. For a long, the stop is below entry and the target is above it. Reverse these relationships for a short. Changing direction clears the two exit prices.

Assumptions and limitations

Each scenario closes the entire position once at the supplied stop or target. The same fixed charge applies once per alternative outcome. Enter all prices and charges in the same major currency. Currency selection changes formatting.

Supported domain and common mistakes

Prices, charges and shares support up to 1 trillion and up to 12 decimal places. Entry and quantity must be positive. Money is exact before display, and ratios are rounded to 24 significant digits. If a feasible break-even rate rounds to 100%, the result identifies it as strictly below 100%.

Keep the orientation explicit. A 1-to-2 risk-to-reward ratio corresponds to a reward-to-risk multiple of 2×. Use charges for the full round trip once per scenario.

Frequently asked questions

What does a 1.4× reward-to-risk multiple mean?
The modeled net target profit is 1.4 times the modeled net stop loss.
What happens if charges equal the gross target profit?
Net target profit is zero. Only reaching the target every time breaks even in the two-outcome model.
Why can net reward-to-risk be negative?
Charges can exceed gross target profit. The resulting target loss divided by positive net stop loss is negative.
Where do the stop and target go for a short?
Use a stop above entry and a target below entry for this loss and profit scenario.
Can I enter fractional shares?
Yes. Enter a positive quantity with up to 12 decimal places.
Does the break-even rate predict my win rate?
The rate is a threshold derived from the two supplied outcomes. It does not estimate how often either exit occurs.

Sources and educational scope

Educational scenario analysis. Actual fills can differ. It excludes execution probabilities, partial exits, margin, borrowing, tax and FX. The break-even threshold does not predict win probability or provide personalized advice.

Reviewed . AI-assisted content under operator editorial responsibility. No independent expert financial review is claimed.

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