Risk Reward Ratio Calculator

Calculate your potential profit against your potential loss before entering a trade. Optimize your trade setups by ensuring a healthy Reward-to-Risk profile.

Free • Trader Verified • Risk Management • Private

Trade Setup

Risk Reward Ratio

1 : 0.00

Risk Per Share

₹0

Reward Per Share

₹0

Total Risk

₹0

Total Reward

₹0

Trade Quality Score

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What is Risk Reward Ratio?

The Risk-to-Reward (RR) ratio is a measure used by traders to compare the potential profit of a trade relative to its potential loss. It is the heart of professional risk management. For instance, if you are willing to risk ₹1,000 to potentially gain ₹3,000, your Risk Reward Ratio is 1:3.

By using a Risk Reward Calculator, you can filter out "low-quality" trades where the risk is too high for the potential payoff. Professional traders combine this tool with a Position Size Calculator to ensure that their "Risk" never exceeds a small percentage of their total trading capital.

Golden Rules of Professional Trading

Risk 1% Only

Never risk more than 1% of your total trading account balance on any single trade setup.

Min 1:2 Ratio

Avoid trades where potential reward is less than twice the risk. This provides a safety margin for errors.

Cut Losses Fast

Stick to your Stop Loss. Averaging down on a losing trade is a recipe for wealth erosion.

Let Profits Run

Don't exit a winning trade too early. Use trailing stop losses to capture large trending moves.

RR Ratio vs. Win Rate

A common misconception is that you need a high win rate to be profitable. In reality, a trader with a 33% win rate and a 1:3 RR ratio is profitable, whereas a trader with a 60% win rate and a 1:0.5 RR ratio will eventually lose money after accounting for Brokerage Charges.

A high RR ratio allows you to be "wrong" more often while still growing your Net Worth over time. This is the primary secret of successful swing and day traders in India.

Frequently Asked Questions

What is a good risk-reward ratio?
Most professional traders consider 1:2 to be the minimum acceptable ratio. Ratios above 1:3 are considered high-probability setups.
Is a 1:1 risk-reward ratio good?
A 1:1 ratio is generally avoided unless your win rate is exceptionally high (above 60%). After factoring in taxes and slippage, a 1:1 ratio often results in break-even or a net loss.
Can I trade with a 1:10 ratio?
Yes, highly specialized strategies (like options buying or deep value investing) can offer 1:10 returns. However, these setups usually have a very low win rate (10-20%).
How do I verify historical returns for a strategy?
You should use a CAGR Calculator to see how your consistent application of a high RR ratio is growing your capital on an annual basis.

Related Financial Tools

Position Size

Brokerage

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SIP Calculator

CAGR Tool

Disclaimer

Calculations provided are for educational purposes. Trading in the stock market involves substantial risk of loss. This tool does not provide buy or sell signals. Always consult a SEBI registered investment advisor before executing trades.

Last Updated: March 2026