Risk Reward Calculator For Traders 

The financial market constantly evolves as you find ways to remain profitable and manage risks. With the risk-reward calculator, you can determine the likely rewards and risks within a trading position. Below is a guide to the WR trading risk reward calculator as a tool for making informed trading decisions.

Specifications of The Risk Reward Calculator 

The following specifications of the risk-reward calculator help to accurately measure how much you’re likely to lose or win in each trade. 

• Stop Loss Price: This is the price point at which the trader has to leave the trade. Once the trade reaches the stop loss price, it automatically stops to prevent you from losing more money.

• Entry Price: This is the average price of assets purchased in your margin trading account, including the weighted price at which you got these assets when opening a position. The current market rate determines a margin trade’s potential income or risk.

• Take Profit: It uses the current market value of the cryptocurrency token to measure your average losses or gains in each trade. This is also the price at which a trader may want to close a profitable trade.

• Risk/Reward Ratio: This is the value of the potential losses compared with the potential income. When the risk is higher, you’re likely to make higher returns.

• Breakeven Win Rate: This is the overall analysis of your trades in different categories. It also represents the minimum amount of successful trades you need to keep making profits based on the risk-reward ratio.

How To Use The Risk Reward Calculator 

The risk-reward calculator offers traders an insight into the amount of money they can risk and the potential profits for each trade. The calculator measures how much you make on every dollar you spend. 

When using the risk reward calculator, you will start by choosing the risk and the reward. You shouldn’t use a random figure because you won’t get an accurate number for your trade. Once you enter these figures, click Calculate to determine the risk-reward ratio before investing. 

Many traders often start with a risk-to-reward ratio of 1:2, 1:1, or even 1:0. However, you must know that if your R/R ratio is low, your chances of earning in the trade will also decrease. 

What Is The Risk Reward Ratio? 

We use the risk reward ratio in forex trading to calculate the potential income realized from a trade compared to the losses. To calculate the ratio, you must divide the potential loss by the potential profit. This helps to determine whether the profit you hope to gain is worth the loss in each trade. 

It is usually expressed as a ratio, for instance, 1:3, where 1 is the likely loss, and 3 represents the likely profit. This means that for every $1 you lose, you gain a profit of $3. You can also use the reverse formula, which divides the potential profit by each amount you risk. In this case, the ratio is 3:1. 

How To Calculate The Risk Reward Ratio Manually 

WR Trading’s risk-reward calculator allows traders to determine the risks and profits in each trade. However, you can also calculate the risk-reward ratio manually by using the following formula: 

Potential Loss 

First, you need to determine your risk, reward, stop-loss, entry, and take-profit prices to get a precise result for your specific trade. For instance, if the stop loss price = $90, the entry Price = $100, and the take profit price = $120.

Then, 

• Risk = Entry price – Stop loss price
• Risk = $100 – $90 
• Risk = $10

• Reward = Take profit price – Entry Price 
• Reward = $120 – $100 
• Reward = $20

To calculate the risk/reward ratio: 

• R/R ratio = $20
• $10
• Risk reward ratio = 2:1 

How To Interpret The Results of The Risk Reward Ratio Calculator? 

Here’s how to interpret the results of the risk-reward calculator:

• Higher Risk-Reward Ratio: When the risk-reward ratio is higher, the potential profits outweigh the losses, which is usually preferable in a margin trade.
• Lower Risk-Reward Ratio: When the risk-reward ratio is lower, it suggests that the reward is much less than the risks involved. 

The Importance Of The Risk Reward Ratio In Connection To The Hit Rate 

The Hit rate is the risk-reward percentage for successful trades. With a lower risk/reward ratio, you will typically need a higher and more consistent win rate to make a profit and secure wins. You can still gain profits with a higher ratio, even with a lower win rate. 

Which Risk Reward Ratio Do You Need For Profitable Trading? 

Generally, trades with a higher risk/reward ratio of about 3:1 are more profitable because they only require a win rate of about 25% to be break even. Meanwhile, with a lower ratio of 2:1, your win rate must be at 33%. To stay profitable, it is better to trade with a higher risk-reward ratio to protect your investment. 

Learn High-Risk Reward Ratio Trading With WR Trading 

The WR Trading calculator helps to determine your potential losses and profits in any margin trade. It enables you to identify trades with high profits and lower risks to secure your investments. You can use the WR Trading risk reward calculator to automate your measurements and maximize your profits.