How it is calculated
Risk is the distance from entry to stop loss, reward the distance from entry to take profit, both in pips.
The ratio is reward divided by risk. A 1:3 trade risks one unit to make three.
The break-even win rate is 1 ÷ (1 + ratio). At 1:3 you need to win 25% of trades to break even, before spread and commission.
R = |Take profit − Entry| ÷ |Entry − Stop loss| · Break-even win rate = 1 ÷ (1 + R)
FAQ
What is a good risk/reward ratio?
There is no single good value. A high ratio needs fewer winning trades, a low ratio needs a high win rate. The break-even line tells you which one your strategy has to deliver.
Does the calculator include spread?
No. Spread and commission push the real break-even win rate a little higher, most of all on tight stops.