Before you take a trade, know the math behind it. Enter your entry, stop-loss and target price to get the risk/reward ratio, the R-multiple you're targeting, and the win rate you'd need just to break even at that ratio.
Risk/reward ratio
—
Risk : reward
—
R-multiple (reward)
—
Breakeven win rate needed
—
Amount at risk
—
Potential reward
Works for longs or shorts — it only uses the distance between entry, stop and target, not their order. "Breakeven win rate" is the minimum win percentage at which this ratio nets to zero over many trades; a real edge needs to beat it, not just match it. Dollar amounts only show once you enter a position size.
Trader's toolkit
Plan the trade here — then track it.Size every trade by risk, journal it, and find out if you actually have an edge. An Excel/Sheets workbook: position sizer, auto trade journal (R-multiple, PnL, win rate) and an equity-curve dashboard.
Disclosure: links to exchanges may be affiliate links. Crypto trading carries risk; never trade with money you can't afford to lose.
What the risk/reward ratio actually tells you
The risk/reward ratio compares how much a trade could lose against how much it could make, measured from the same entry point: risk is the distance from entry to your stop-loss, reward is the distance from entry to your target. A "1:2" ratio (often written R:R) means you're risking one dollar to make two — for every unit of R you put on the line, the plan pays back two units if it hits.
The "R" in R-multiple is that risk unit itself. A trade with a 1:3 risk/reward is "targeting 3R" — three times your initial risk. Traders use R-multiples instead of raw dollar amounts specifically so results are comparable across trades of very different sizes: a $200 win on $100 risked is the same 2R as a $2,000 win on $1,000 risked.
Why ratio alone doesn't tell you if a trade is good
A favorable ratio means nothing without knowing how often it wins. That's what the breakeven win rate answers: the minimum win percentage at which the ratio nets to exactly zero over many trades, derived from win%×reward = (1−win%)×risk. At 1:1 you need to win more than 50% of the time just to break even; at 1:2 that bar drops to roughly 33%; at 1:3 it drops to 25%. A wider ratio buys room to be wrong more often and still come out ahead — which is why traders who can't reliably predict direction often lean on wide risk/reward setups instead.
The trap runs the other way too: a huge ratio on a setup that almost never hits its target is not actually a good trade — the breakeven win rate is a floor your real, observed win rate has to clear, not a target to aim for exactly.
Using this before you size the trade
Risk/reward is a pre-trade planning number — set your stop and target first, run them here, and only take trades where the ratio comfortably clears what your realistic win rate needs. Once a setup passes that filter, the position-size calculator turns your dollar risk tolerance into an actual position size, and after the trade closes, the same entry/exit numbers plugged into the futures PnL calculator show what it made in real terms, fees included.
Frequently asked questions
How do you calculate risk/reward ratio in trading?
Risk is the price distance from your entry to your stop-loss; reward is the distance from entry to your target. Risk/reward ratio = reward ÷ risk. A ratio of 2 (written 1:2) means the potential reward is twice the amount risked.
What is a good risk/reward ratio for crypto trading?
There's no universal 'good' ratio in isolation — it only matters relative to your actual win rate. Many traders target at least 1:2 so their breakeven win rate sits comfortably below 50%, leaving room for a strategy that isn't always right.
What does R-multiple mean?
R-multiple expresses a trade's result as a multiple of the initial dollar risk (1R). A trade that risks $100 and makes $300 is a +3R result. Measuring in R lets you compare trades of very different sizes on the same scale.
What is breakeven win rate and why does it matter?
It's the minimum percentage of trades that must win for a given risk/reward ratio to net zero over time, calculated as risk ÷ (risk + reward). Your actual win rate needs to exceed this figure for the strategy to be profitable, not just match it.
After sending, paste your transaction ID (TxID / hash) from your wallet or exchange withdrawal — payment is verified on-chain and your download opens instantly.