Calculating your reward-to-risk ratio (to 1) is straightforward once you know the Risk Reward Ratio formula and what each input means. This guide explains the method in plain language, walks through a manual calculation, and gives worked examples you can follow — then you can do it instantly with the Risk Reward Ratio Calculator.
What is Risk Reward Ratio?
The Risk Reward Ratio calculation tells you your reward-to-risk ratio (to 1) from a few simple inputs. The figure you are solving for here is the reward-to-risk ratio (to 1).
The Risk Reward Ratio formula
The core formula is:
Reward-to-risk ratio (to 1) = (Target price - Entry price) ÷ (Entry price - Stop-loss price)Here is what each input means:
- Entry price — a money amount. Example: ₹100.
- Stop-loss price — a money amount. Example: ₹95.
- Target price — a money amount. Example: ₹115.
How to calculate it step by step
- Write down the entry price (for example, ₹100).
- Write down the stop-loss price (for example, ₹95).
- Write down the target price (for example, ₹115).
- Apply the formula above to get your reward-to-risk ratio (to 1).
- Double-check the result with the Risk Reward Ratio Calculator.
Worked examples
Example 1
| Input / Output | Value |
|---|---|
| Entry price | ₹100 |
| Stop-loss price | ₹95 |
| Target price | ₹115 |
| Reward-to-risk ratio (to 1) | 3.00 |
| Risk per share | ₹5.00 |
| Reward per share | ₹15.00 |
With entry price of ₹100, stop-loss price of ₹95 and target price of ₹115, the reward-to-risk ratio (to 1) works out to 3.00.
Example 2
With entry price of ₹200, stop-loss price of ₹95 and target price of ₹115, the reward-to-risk ratio (to 1) works out to -0.81.
| Result | Value |
|---|---|
| Reward-to-risk ratio (to 1) | -0.81 |
| Risk per share | ₹105.00 |
| Reward per share | -₹85.00 |
Example 3
With entry price of ₹50, stop-loss price of ₹95 and target price of ₹115, the reward-to-risk ratio (to 1) works out to -1.44.
| Result | Value |
|---|---|
| Reward-to-risk ratio (to 1) | -1.44 |
| Risk per share | -₹45.00 |
| Reward per share | ₹65.00 |
Tips for an accurate result
- Keep your units consistent — mixing, say, months with years or grams with kilograms is the most common source of error.
- Round only at the very end. Rounding inputs early can shift the final answer noticeably.
- Re-run the numbers whenever an input changes, rather than estimating from an old result.
- Annual rates must be converted to the period you are calculating for (for example, divide an annual rate by 12 for a monthly figure).
Prefer not to do the maths by hand? — the Risk Reward Ratio Calculator does it instantly, for free, with the formula and a worked example built in.
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