Risk/reward calculator with fees
Enter an entry, stop and target to see the ratio, the win rate you need to break even, and what fees do to both.
Calculations run in your browser. Nothing you type is sent or stored. Results are estimates for information only, not investment advice.
How it works
The risk is what you lose if the stop-loss fills, and the reward is what you gain if the target fills. The ratio of the two decides how often you must win to break even:
R = |Target − Entry| ÷ |Entry − Stop|
Break-even win rate = 1 ÷ (1 + R)
Fees make the loss bigger and the gain smaller. With a fee rate f charged on every fill, the loss is Q × |E − S| + f × (E × Q + S × Q) and the gain is Q × |T − E| − f × (E × Q + T × Q). Net R is the net gain divided by the net loss, and the break-even win rate after fees is loss ÷ (loss + gain). The expected value per trade is win rate × gain − (1 − win rate) × loss.
Worked example
The page opens with a long of 10 units at 100, a stop at 95 and a target at 110. The risk is 50 and the reward is 100, so R = 2.0 and the break-even win rate before fees is 33.3%. With a 0.1% fee on each fill, the loss grows to 51.95 and the gain shrinks to 97.90, so net R is 1.88 and the break-even win rate rises to 34.67%. At a 40% win rate the expected value is 0.40 × 97.90 − 0.60 × 51.95 = 7.99 per trade.
Break-even win rate by risk/reward ratio
| Reward : risk | Break-even win rate | With 0.1R of fees |
|---|---|---|
| 0.5 : 1 | 66.7% | 73.3% |
| 1 : 1 | 50.0% | 55.0% |
| 1.5 : 1 | 40.0% | 44.0% |
| 2 : 1 | 33.3% | 36.7% |
| 3 : 1 | 25.0% | 27.5% |
| 4 : 1 | 20.0% | 22.0% |
| 5 : 1 | 16.7% | 18.3% |
The arithmetic runs in both directions. A rule that wins 60% of its trades with small gains can lose money, and a rule that wins a third of its trades can make money if the winners are large enough. Our own backtests showed both: oversold-buying rules won more than half their trades and lost money, while trend following won 36% of the time and paid.
Questions
What is a good risk/reward ratio?
There is no single answer, because it depends on the win rate. A 1 : 1 setup needs to win more than half the time, a 3 : 1 setup about a quarter of the time, before fees. Use the table to see which pairs your own record could support.
Does a higher ratio always help?
No. A target further from the entry is hit less often, so the win rate usually falls as the ratio rises. What matters is the product of the two, minus costs, measured on real trades.
Why do fees matter so much here?
Fees are a fixed cost on every trade, so they take a larger share of a small gain. When the stop is close to the entry, a fee of 0.1% on each fill can be a big part of the risk.
What is net R?
It is the gain you would keep if the target fills, divided by the loss you would take if the stop fills, both after fees. It is lower than the plain ratio.