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Trading Risk Kit
Four strategy checks in one tool: risk-to-reward with the breakeven win rate, average expectancy per trade, the probability of ruining your account, and the Kelly criterion stake for your edge.
Tool
Risk : reward1 : 2.30
Risk per unit0.00500
Reward per unit0.01150
Breakeven win rate30.30%
Breakeven win rate by R:R
The win rate you need just to break even at common risk-to-reward ratios. Your actual win rate must exceed this figure for the setup to have positive expectancy.
| Risk : reward | Breakeven win rate |
|---|---|
| 1:1 | 50.0% |
| 1:1.5 | 40.0% |
| 1:2 | 33.3% |
| 1:2.3 | 30.3% |
| 1:3 | 25.0% |
| 1:4 | 20.0% |
How it works
R:R = |Target − Entry| ÷ |Entry − Stop|
Breakeven win rate = 1 ÷ (1 + R:R)
Risk of ruin = ((1 − E) ÷ (1 + E))^N, E = edge, N = 100 ÷ risk%
Kelly % = W − (1 − W) ÷ RWorked example
Entering at 100 with a stop at 95 and target at 110 gives a 1:2 risk-to-reward, so you break even winning just 33.3% of trades. A 55% win rate with a 1.5 payoff produces a Kelly stake of 25% — half Kelly (12.5%) is the common practical choice.
FAQ
What is a good risk-to-reward ratio?
There is no universally “good” ratio — it trades off against win rate. A 1:2 ratio breaks even at a 33.3% win rate; 1:1 needs 50%. What matters is that your actual win rate exceeds the breakeven rate for the ratio you trade.
How is risk of ruin calculated?
We use the classic gambler’s-ruin approximation ((1 − E) ÷ (1 + E))^N, where E is your edge per unit risked — derived from win rate and payoff ratio — and N is how many risk units your account holds (100 ÷ risk per trade). Smaller risk per trade increases N and shrinks ruin probability dramatically.
What is the Kelly criterion?
Kelly gives the stake that maximizes long-run growth of your account for a given edge: W − (1 − W) ÷ R, where W is win rate and R the payoff ratio. Full Kelly is volatile, so most traders use half Kelly or less.
Why does the kit say I have no edge?
If your win rate times payoff ratio doesn’t exceed your loss rate, expectancy is zero or negative: no stake size is profitable long-term, risk of ruin approaches 100%, and Kelly clamps to 0%. Improve the strategy before sizing it.
What is expectancy?
Expectancy is the average money you make or lose per trade: (win rate × average win) − (loss rate × average loss). A 50% win rate with a $250 average win and $100 average loss has +$75 expectancy and is profitable long-term.
Why show both 50% drawdown and 100% loss?
Full ruin is the chance of losing the entire account. The 50% drawdown figure answers how likely you are to cut the account in half — often the more practical pain threshold traders actually hit.
Can I enter a 0% win rate?
Yes. A 0% win rate is a valid stress-test: ruin is certain and Kelly is zero. Use it to see what a losing streak does to the account at your chosen risk per trade.
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The results produced by these calculators are estimates based on live market prices and the inputs you provide. They are for informational purposes only and do not constitute investment advice. Actual trading conditions, including spreads, commissions, swap rates and broker margin requirements, may differ. Trading foreign exchange and CFDs carries a high level of risk and may not be suitable for all investors.
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