Calculate the risk/reward ratio and R-multiple from your entry, stop and target prices.
How this is calculated
Risk per unit = |entry price − stop-loss price|
Reward per unit = |target price − entry price|
Risk/reward ratio = reward per unit ÷ risk per unit (the R-multiple of the target)
Breakeven win rate = 100 ÷ (1 + ratio)
Closed trade: raw move = exit − entry on a long, entry − exit on a short
Realised R-multiple = raw move ÷ initial risk
Worked example
Long entry $100.00, stop $98.00, target $106.00.
Risk = $2.00 per unit. Reward = $6.00 per unit.
Ratio = 6 ÷ 2 = 3.00, so the target is a 3.00R outcome.
Breakeven win rate = 100 ÷ (1 + 3) = 25.0%.
If that trade later exits at $104.50, the realised R-multiple = 4.50 ÷ 2.00 = 2.25R.
Understanding risk/reward and R-multiples
An R-multiple expresses a trade's outcome as a multiple of the amount risked. If the initial risk is $250.00 and the trade closes $750.00 in profit, the result is 3.00R. Normalising results this way lets trades of different sizes and instruments be compared on one scale.
The planned ratio is the arithmetic relationship between the entry, stop and target you enter before the trade. The realised multiple is measured after the fact from the actual exit price, which is why the two panels here are separate.
A higher ratio lowers the win rate required to break even arithmetically, but it says nothing about whether that target is reachable. Ratio and probability are separate questions: this tool answers only the first.
Costs sit outside the arithmetic. Spread, commission and financing all reduce the realised multiple relative to the planned one.
Frequently asked questions
What does 3R mean?
It means the outcome equals three times the amount initially risked on the trade. R-multiples restate results as multiples of risk so trades of different sizes can be compared.
How is a realised R-multiple calculated?
Divide the raw price move in your favour by the initial risk distance. A long that moved $4.50 with a $2.00 initial risk returned 2.25R.
Is a higher risk/reward ratio always better?
Not automatically. Ratio is arithmetic; whether price reaches a distant target is a separate question. A wide target lowers the breakeven win rate but is typically hit less often.
How is the breakeven win rate derived?
It is 100 ÷ (1 + ratio). At a 3:1 ratio, 25% of trades reaching target offsets the 75% that reach the stop, before costs.
Does this include fees?
No. Commissions, spread and financing costs are not included and will reduce the realised R-multiple.