Forex Risk-Reward Calculator
Last reviewed: April 2026
Evaluate any forex trade setup by comparing the potential reward to the risk before you enter. Input your entry price, stop loss, and take profit to instantly calculate the risk-reward ratio for both buy and sell trades. Use the results to decide whether a setup meets your criteria or needs adjusting before placing the order.
Example Calculation
Here is how a typical risk-reward calculation works for a buy trade on EUR/USD:
- Entry price: 1.08500
- Stop loss: 1.08250
- Take profit: 1.09000
- Risk: 25 pips
- Reward: 50 pips
- Risk-Reward Ratio: 1:2.00
What Is a Risk-Reward Ratio in Forex?
The risk-reward ratio is a simple metric that compares how much you could lose on a trade (risk) to how much you could gain (reward). It is calculated by dividing the distance from your entry to your take profit by the distance from your entry to your stop loss. For example, if your stop loss is 25 pips away and your take profit is 50 pips away, your risk-reward ratio is 1:2.
How to Calculate Risk-Reward
The formula is straightforward:
Risk-Reward Ratio = (Take Profit - Entry) / (Entry - Stop Loss)
For sell trades, reverse the logic: risk is the distance from entry up to the stop loss, and reward is the distance from entry down to the take profit. Our calculator handles both directions automatically.
Why Risk-Reward Matters
A favourable risk-reward ratio means you do not need to win every trade to be profitable. With a consistent 1:2 ratio, you only need to win around 34% of your trades to break even. Combined with proper position sizing, risk-reward analysis forms the backbone of disciplined trading. Understanding your pip values through our pip value calculator helps you translate pip-based ratios into real monetary figures.
What Is a Good Risk-Reward Ratio?
There is no universal answer. Many traders consider 1:2 the minimum acceptable ratio, meaning every pound risked could return two pounds. However, the ideal ratio depends on your win rate. A scalping strategy with a 70% win rate might work well at 1:1, while a swing trading strategy with a 40% win rate needs at least 1:2 to remain profitable over time.
Risk-Reward vs Win Rate
Risk-reward and win rate are two sides of the same coin. A high risk-reward ratio compensates for a lower win rate, and vice versa. The key metric is expectancy: (win rate × average win) minus (loss rate × average loss). If your expectancy is positive, your strategy is viable. Use this calculator alongside your trading journal to evaluate whether your setups offer enough reward for the risk involved.
How to Use This Calculator
Enter your planned entry price, stop loss, and take profit. Select whether the trade is a buy or sell. The calculator will show you the risk and reward in pips, the ratio between them, and optionally the monetary values if you enter a lot size.
Use this before placing any trade to check whether the potential reward justifies the risk. If the ratio is too low, consider adjusting your take profit or waiting for a better setup.
Frequently Asked Questions
What is a risk-reward ratio in forex?
A risk-reward ratio compares the potential loss of a trade (risk) to the potential gain (reward). For example, a 1:2 ratio means you stand to gain twice as much as you could lose. It is one of the most important metrics for evaluating whether a trade setup is worth taking.
What is a good risk-reward ratio?
Many traders aim for a minimum of 1:2, meaning the potential reward is at least twice the risk. However, what counts as good depends on your win rate. A trader with a high win rate may accept 1:1 setups, while a lower win rate strategy needs higher ratios to remain profitable.
How do I calculate risk-reward?
Subtract your stop loss from your entry price to find the risk in pips. Subtract your entry price from your take profit to find the reward in pips. Divide the reward by the risk. For example, 25 pips risk and 50 pips reward gives a 1:2 ratio.
Does risk-reward ratio guarantee profit?
No. Risk-reward ratio does not account for win rate. A 1:3 ratio is meaningless if you only win 10% of your trades. The key is finding a balance between a favourable ratio and a realistic win rate based on your strategy.
Can I use this calculator for sell trades?
Yes. Select Sell (Short) as your trade direction. The calculator will correctly handle the reversed logic where your stop loss is above entry and your take profit is below entry.