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Online Free Risk-Reward Ratio Calculator for Traders

What is the Risk-Reward Ratio?

The Risk-Reward Ratio (R/R Ratio) is a critical metric used by traders to assess the potential return on a trade relative to the risk involved. It is a key part of effective risk management, helping traders make decisions that align with their overall strategy and risk tolerance.

How It Works:

The risk-reward ratio compares the potential loss on a trade (risk) to the potential gain (reward). A common target for traders is a risk-reward ratio of at least 1:2, meaning the potential reward is twice as high as the risk. For example:

  • Risk: If the stop loss is ₹10 below the entry price.
  • Reward: If the target price is ₹20 above the entry price.
  • Risk-Reward Ratio: 20/10 = 2:1, a favorable trade.

A positive risk-reward ratio ensures you are earning more from successful trades than what you are risking on losses.

Why is the Risk-Reward Ratio Important?

The risk-reward ratio helps you determine whether a trade is worth entering. By calculating this ratio, you can make informed decisions and avoid excessive losses. Proper risk management ensures long-term profitability, even with occasional losing trades. Here’s why it’s important:

  • Minimizes Risk: Helps set a clear stop-loss level to limit losses.
  • Maximizes Reward: Encourages selecting trades with favorable potential returns.
  • Supports Consistency: Ensures a balanced approach to risk and reward, making your trading strategy more consistent.

How to Use the Risk-Reward Ratio Calculator:

Our Risk-Reward Ratio Calculator allows you to quickly determine the risk and reward for any trade. Here’s how you can use it:

  1. Enter Your Entry Price: This is the price at which you plan to enter the market.
  2. Set Your Stop Loss: The price at which you will exit the trade to limit losses.
  3. Define Your Target Price: The price at which you aim to exit the trade to secure profits.

Once you enter these values, the calculator will display the risk-reward ratio and show if the trade offers a good risk-reward profile. A ratio of at least 1:2 is typically considered favorable.

Try the Risk-Reward Ratio Calculator: