# What Is the Risk/Reward Ratio and How Is It Calculated?

> Learn what the risk/reward ratio means and how to compute it from entry, stop-loss and target levels.

Last updated: 2026-10-22 · https://www.nx24.ai/en/rehber/risk-odul-orani-nedir

## What is the risk/reward ratio?

It compares the potential loss you accept in a trade with the potential gain you aim for. With an entry of 100, a stop at 95 and a target of 115, risk is 5 and reward is 15, so the ratio is 1 to 3.

## How is it calculated?

Reward = target − entry; risk = entry − stop (long side). Ratio = reward / risk. For short trades the signs are reversed.

## Is the ratio enough on its own?

No. A high ratio is of little use if the target is unlikely to be reached. Win rate and ratio are judged together: with a 1 to 2 ratio, winning one trade in three is break-even.

## Where do the levels come from?

The stop usually sits below a nearby support or an ATR-based distance, and the target at the next resistance. Levels should be scaled to the market's volatility.

## Things to watch

Spread, commission and slippage increase the real risk. This page is educational, not investment advice.

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Not investment advice. NX24 — https://www.nx24.ai/