Question 1

What is risk/reward ratio and why does it matter?

Accepted Answer

Risk/reward ratio compares the potential loss (risk) to the potential gain (reward) of a trade. A 1:2 ratio means you risk $1 to potentially make $2. Higher ratios mean you can be profitable even with a lower win rate. Most professional traders aim for at least 1:2 or better.

Question 2

What win rate do I need to be profitable?

Accepted Answer

The required win rate depends on your risk/reward ratio. At 1:1 R:R, you need above 50% wins to cover commissions. At 1:2, you only need about 33%. At 1:3, roughly 25%. The break-even win rate formula is: Win Rate = 1 / (1 + R:R ratio). This calculator factors in commissions for a more accurate break-even number.

Question 3

How does commission impact my break-even price?

Accepted Answer

Commissions create a cost that must be overcome before a trade becomes profitable. The break-even price is the exit price at which your gross P&L exactly covers the round-trip commission. For example, trading 1 ES contract with $4 per side commission requires a 0.50 point move ($25 gross) just to cover the $8 round-trip cost.

Question 4

How is the break-even price calculated?

Accepted Answer

Break-even price accounts for total round-trip commissions. For a long trade: break-even = entry price + (total commission / (point value * contracts)). For a short trade: break-even = entry price - (total commission / (point value * contracts)). The calculator computes this automatically.

Question 5

Should I always aim for the highest risk/reward ratio?

Accepted Answer

Not necessarily. Higher R:R ratios typically mean wider profit targets, which reduces win rate. The best approach balances R:R with realistic win probability. A 1:1.5 setup you can win 60% of the time may outperform a 1:5 setup you only win 15% of the time. Focus on positive expected value: (win rate * avg win) - (loss rate * avg loss) > 0.

Question 6

What is a good commission rate for futures trading?

Accepted Answer

Most futures brokers charge between $0.50 and $4.00 per side per contract, plus exchange and NFA fees. The default $4.00 in this calculator represents a typical all-in cost including exchange fees. Lower commissions improve your break-even and make smaller R:R trades more viable. Always factor in the full round-trip cost (entry + exit).

Trade Return Calculator

Trade Parameters

Trade Analysis

Risk vs Reward

Frequently Asked Questions

Everything You Need, One Platform

Products

Platforms

Resources

Company

Legal