# Risk/Reward Ratio Calculator

> Computes the risk and reward per share from an entry, stop-loss and target price, the reward-to-risk ratio and the win rate at which such trades break even.

- Calculator id: `risk-reward-ratio` · Category: Investing & Real Estate (`investing`) · Tool name: `calculate_risk_reward_ratio`
- Canonical page: https://tttkmbb.com/investing/risk-reward-ratio · This document: https://tttkmbb.com/investing/risk-reward-ratio.md · JSON definition: https://tttkmbb.com/investing/risk-reward-ratio.json

## Purpose

Computes the risk and reward per share from an entry, stop-loss and target price, the reward-to-risk ratio and the win rate at which such trades break even.

**Use when:** You are planning a trade with a stop and a target and want to know whether the potential gain justifies the risk, or the minimum hit rate the setup needs.

**Do not use when:** You need the number of shares to trade (use position-sizing) or the expected value of a bet with known odds. Informational only; not financial advice.

## Input

| Parameter | Type | Unit | Required | Description |
| --- | --- | --- | --- | --- |
| `entry_price` | number |  | required | Planned entry price per share or unit. (> 0, max 1000000000) |
| `stop_loss_price` | number |  | required | Exit price if the trade goes wrong (below entry for a long, above for a short). (min 0, max 1000000000) |
| `target_price` | number |  | required | Planned profit-taking price on the opposite side of the entry from the stop. (min 0, max 1000000000) |

## Output

| Field | Type | Unit | Description |
| --- | --- | --- | --- |
| `risk_per_unit` | number |  | \|entry_price − stop_loss_price\|. |
| `reward_per_unit` | number |  | \|target_price − entry_price\|. |
| `risk_reward_ratio` | number |  | reward_per_unit / risk_per_unit. |
| `ratio_text` | string |  | The ratio written as reward : risk, e.g. '3 : 1'. |
| `risk_percent_of_entry` | number | % | risk_per_unit / entry_price × 100. |
| `reward_percent_of_entry` | number | % | reward_per_unit / entry_price × 100. |
| `breakeven_win_rate_percent` | number | % | 100 / (1 + risk_reward_ratio): the share of winning trades at which expected profit is zero. |
| `direction` | string |  | Long when the target is above the entry, short when below. |

## Formula

`risk = |entry_price − stop_loss_price|; reward = |target_price − entry_price|; risk_reward_ratio = reward / risk; breakeven_win_rate_percent = 100 / (1 + risk_reward_ratio)`

Planned (not realised) risk and reward, ignoring commissions, slippage and the chance that price gaps through the stop; the break-even rate assumes every trade ends at either the stop or the target. Informational mathematics only; not financial advice.

## Data Sources

- Wikipedia – Risk return ratio — https://en.wikipedia.org/wiki/Risk_return_ratio (reference, retrieved 2026-09-24)
- Britannica Money – Calculating position size in trading — https://www.britannica.com/money/calculating-position-size (reference, retrieved 2026-09-24)

Data freshness: `static`. Deterministic formula with fixed constants; results never go stale. Inputs supplied by the caller determine the output.

## API

- `GET https://tttkmbb.com/api/v1/calculate/risk-reward-ratio?entry_price=…&stop_loss_price=…&target_price=…`
- `POST https://tttkmbb.com/api/v1/calculate/risk-reward-ratio` with JSON body `{"inputs": {…}}`
- Response: unified envelope (`success`, `request`, `result.values`, `result.units`, `sources`, `freshness`, `timestamp`, `next_actions`, `links`); see https://tttkmbb.com/docs/response-format.md
- Schema: https://tttkmbb.com/api/v1/calculators/risk-reward-ratio · OpenAPI operationId `calculate_risk_reward_ratio` in https://tttkmbb.com/openapi.json
- Authentication: none. Rate limit: fair use, see https://tttkmbb.com/docs/rate-limits.md.

## MCP

- Server: `https://tttkmbb.com/mcp` (Streamable HTTP, JSON-RPC 2.0, no auth)
- Tool:  `run_calculator` with `{"calculator_id": "risk-reward-ratio", "inputs": {…}}`

## Example

- Long: entry 100, stop 95, target 115: inputs `{"entry_price":100,"stop_loss_price":95,"target_price":115}` → `{"risk_per_unit":5,"reward_per_unit":15,"risk_reward_ratio":3,"ratio_text":"3 : 1","risk_percent_of_entry":5,"reward_percent_of_entry":15,"breakeven_win_rate_percent":25,"direction":"Long (stop-loss below entry)"}`
- Short: entry 50, stop 53, target 44: inputs `{"entry_price":50,"stop_loss_price":53,"target_price":44}` → `{"risk_per_unit":3,"reward_per_unit":6,"risk_reward_ratio":2,"ratio_text":"2 : 1","breakeven_win_rate_percent":33.33,"direction":"Short (stop-loss above entry)"}`

```
GET https://tttkmbb.com/api/v1/calculate/risk-reward-ratio?entry_price=100&stop_loss_price=95&target_price=115
```

## Limitations

You need the number of shares to trade (use position-sizing) or the expected value of a bet with known odds. Informational only; not financial advice. Planned (not realised) risk and reward, ignoring commissions, slippage and the chance that price gaps through the stop; the break-even rate assumes every trade ends at either the stop or the target. Informational mathematics only; not financial advice. All values are computed from the formula above; no measurement or live data is involved.

## FAQ

**Is the ratio quoted as risk:reward or reward:risk?**

Traders say 'risk/reward of 1:3' meaning 1 unit risked for 3 gained; this calculator reports the reward per unit of risk (3) and writes it as '3 : 1'.

**How is the break-even win rate derived?**

With win rate p, expected profit per trade is p × reward − (1 − p) × risk; setting it to zero gives p = risk / (risk + reward) = 1 / (1 + ratio).

## Related

- [Position Size Calculator](https://tttkmbb.com/investing/position-sizing.md) — Number of shares for the chosen risk.
- [Stock Profit Calculator](https://tttkmbb.com/finance/stock-profit.md) — Profit at the target after commissions.
- [Expected Value Calculator](https://tttkmbb.com/statistics/expected-value.md) — Expected value of an outcome with given probabilities.