Risk-reward ratio and the win rate you need to break even
Traders argue about win rate and risk-reward as if one of them were enough. They are two sides of one equation. This guide shows how they trade off, and how costs quietly raise the bar.
Last updated 2026-10-05 · Educational content, not investment advice
What R:R means
Risk-reward (R:R) compares how far your target is from entry with how far your stop is. If your stop is 5 USD away and your target is 10 USD away, the R:R is 1:2: you aim to make two units for every unit you risk.
R:R = target distance ÷ stop distance
The win rate you need to break even
Break-even win rate = risk ÷ (risk + reward) = 1 ÷ (1 + R:R)
- R:R of 1:0.5 needs a win rate of about 66.7%.
- R:R of 1:1 needs 50%.
- R:R of 1:2 needs about 33.3%.
- R:R of 1:3 needs 25%.
This is why a high R:R can be profitable even if you lose more often than you win, and why a low R:R needs a high win rate.
All numbers are hypothetical examples to explain the formula. They are not market data and not a trading recommendation.
Expectancy per trade
Expectancy (in R) = win rate × R:R − loss rate
With a real win rate of 40% and R:R of 1:2, expectancy = 0.4 × 2 − 0.6 = +0.2 R per trade. It only means something if the 40% comes from enough real trades of your own, and it says nothing about any single trade.
How costs raise the bar
Spread and commission are paid on every trade. If they total 0.06 of your risk per trade (a 0.3 USD spread on a 5 USD stop), the break-even win rate rises to (1 + 0.06) ÷ (R:R + 1).
- At R:R 1:1 break-even goes from 50% to about 53%.
- At R:R 1:2 it goes from about 33.3% to about 35.3%.
- At R:R 1:3 it goes from 25% to about 26.5%.
The 40% / 1:2 example above falls from +0.20 R to +0.14 R per trade after costs, and a 50% / 1:1 system that breaks even before costs loses 0.06 R per trade after them. See how spread costs add up.
How to use this
- Before a trade, compute R:R and the break-even win rate with the risk-reward calculator.
- Estimate your real costs with the spread cost calculator.
- Use the risk simulator to see how long a losing streak can last even with positive expectancy.
- Trust your win rate only after you have logged enough real trades.
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This tool is educational. Results are estimates from the numbers you enter and are not investment advice. Trading CFDs is high risk and you can lose everything. Read the full risk warning