Who is it for?
Users who want to quantify risk before trading Anyone who verifies account and symbol specifications
Risk & Position Sizing
Risk / Reward Analyzer
Analyze gross and net risk-reward, multiple targets, trading costs and break-even win rate for a trade scenario.
FreeNo installationEducational & analytical
Free with a TupTrader account
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The guide and calculation method stay public on this page. Sign-in is only required to open the interactive workspace.
Tool guide
How is risk-reward ratio calculated?
Risk-reward compares potential loss to the stop with potential gain to the target. A higher ratio is not automatically better because costs, win probability and stop/target quality also matter.
Logic / formula
Reward/risk = target distance ÷ stop distance; simple break-even win rate = risk ÷ (risk + reward).
Read the output
Read net R:R together with break-even win rate and costs.
TT-FT-003 · versioned engine risk-reward@2.0.0 · educational/analytical use; not investment advice.
Full guide, examples, and sources
When should you not rely on it?
Guessed inputs or invalid broker specifications Using it as a profit forecast
Logic, formula and methodology
Risk-reward compares potential loss to the stop with potential gain to the target. A higher ratio is not automatically better because costs, win probability and stop/target quality also matter. Reward/risk = target distance ÷ stop distance; simple break-even win rate = risk ÷ (risk + reward).
Direction-aware entry/stop/target validation, gross and net reward-to-risk, spread and commission costs, break-even win rate, actual account risk, planned risk budget, and variance warnings.
Worked example
Example
Risk 1R for a 2R target with a theoretical break-even win rate near 33.3%
With 1R risk and 2R reward, the simple pre-cost break-even win rate is about one third; costs raise that threshold.
With 1R risk and 2R reward, the simple pre-cost break-even win rate is about one third; costs raise that threshold.
How to read the result
The headline number must be read with assumptions and warnings. Out-of-bound values should be corrected before trading.
Gross R:R describes price geometry; net R:R includes trading costs. With multiple targets, target allocation changes effective reward. Compare break-even win rate with a credible historical sample.
What the TupTrader version adds
The value of this version is not cosmetic; the result, assumptions and workflow are connected to the practical capabilities below.
- Interactive Entry/Stop/TP ladder
- TP1/TP2/TP3
- Partial exit allocation
- Cost waterfall
- Risk budget vs actual
- Gross vs Net comparison
- Scenario A/B/C
- Warning when net R:R is weak despite attractive gross R:R
Turn the result into a workflow
Related tool →Cross-check the result with the broker or platform. Record risk in the entry checklist. Record the actual value in the journal after the trade.
Common mistakes and limitations
- Confusing risk with margin or potential profit
- Ignoring costs and rounding
- Using the wrong unit or currency
- The tool does not predict the probability of TP or SL being hit and does not model intrabar ordering, slippage or gaps unless explicitly included.
Frequently asked questions
Does a 2R target mean the trade is good?
No. It only describes payoff geometry; setup quality, probability, costs and execution are separate questions.
Should the target be derived from the stop?
Not necessarily. Stop and target should come from the strategy’s market logic; R:R is then used to evaluate the relationship.
Why is net R:R lower than gross R:R?
Spread, commission and other costs consume reward or increase effective risk.
Sources and research method
This guide combines the tool’s versioned specification, the earlier TupTrader educational page and the authoritative sources below. External sources are used for definitions and scientific boundaries, not for signals.
- CME Group — The Mathematics of Trading SuccessMathematical expectation from win/loss frequency and average win/loss size.
- CME Group — What is the True Cost of Trading in FX Markets?Separates direct fees, bid-ask spread and holding/financing costs.
This tool is for education, scenario analysis and process control. It is not investment advice, a buy/sell signal or a guarantee of future performance.