What is Risk Reward Calculator?
A Risk Reward Calculator helps stock traders calculate the risk-reward ratio for trades, determine optimal stop loss and target prices, and assess whether a trade is worth taking. A good risk-reward ratio is 1:2 or better (risk ₹1 to potentially gain ₹2). Essential for day traders, swing traders, and investors following proper risk management. Know your reward-to-risk ratio before entering any trade to maximize profitability and minimize losses!
Formula
Risk-Reward Ratio = Potential Profit ÷ Potential Loss
Risk = Entry Price - Stop Loss
Reward = Target Price - Entry Price
Example: Buy at ₹100, SL ₹95, Target ₹110. Risk = ₹5, Reward = ₹10, Ratio = 1:2 (Good trade!)
Benefits of Using Risk Reward Calculator
Calculate R:R Ratio – Know if trade is worth the risk
Stop Loss Optimization – Set logical SL based on risk tolerance
Target Price Planning – Define realistic profit targets
Win Rate Analysis – Minimum win % needed for profitability
Risk Management – Never risk more than 1-2% capital per trade
Free & Accurate – Essential for stock, forex, crypto trading
Pro Tip: Professional traders never take trades below 1:2 risk-reward ratio! If your win rate is 40%, you need minimum 1:2 R:R to be profitable long-term. With 1:3 ratio, even 30% win rate = profits. Always calculate before entering trade!
Frequently Asked Questions
Minimum: 1:2 (risk ₹1 to gain ₹2). Good: 1:3. Excellent: 1:4+. Day traders: 1:2. Swing traders: 1:3. Positional: 1:4+. With 1:3 R:R, you only need 33% win rate to break even, 40% to be very profitable!
Technical: Use support/resistance levels. Percentage: Risk 1-2% of capital. Example: ₹1L capital, risk 2% = ₹2,000. Buy stock at ₹100 for 200 qty. SL at ₹90 (loss = ₹2,000). For 1:2 R:R, target = ₹120.
Break-even win rate = 1 ÷ (1 + R:R). For 1:2: 1/(1+2) = 33.3%. So you need 34% win rate to break even, 40%+ to profit! With 50% win rate at 1:2 R:R, you double your money over time!
Not recommended! With 1:1 R:R, you need 50%+ win rate JUST to break even (+ brokerage makes it 55%). Market randomness makes this difficult. Always aim for 1:2+ ratio to have margin of safety!
Rule: Never risk more than 1-2% of total capital in ONE trade. ₹5L capital? Max risk = ₹5,000-10,000. This way, you can survive 50-100 losing trades without blowing your account. Consistency > big bets!
Nifty at 21,000. Your analysis: Buy at 21,000, SL 20,850 (risk 150 points), Target 21,450 (reward 450 points). R:R = 1:3. If you trade 1 lot (50 qty): Risk = 150×50 = ₹7,500, Potential Profit = ₹22,500. Perfect trade setup!