Risk-Reward Ratio in Crypto Trading: How to Calculate and Use It
The risk-reward ratio compares how much you could lose on a trade with how much you could gain. Combined with your win rate, it tells you whether a strategy can be profitable over time — no matter how good or bad any single trade looks.
The formula
Risk = |Entry − Stop-loss|
Reward = |Take-profit − Entry|
Risk-reward ratio = 1 : (Reward ÷ Risk)
Run your own numbers with the free calculator: Position Size Calculator
Open calculator →Example
Long BTC at $100,000, stop at $97,000, take-profit at $109,000.
- Risk: $3,000 per BTC
- Reward: $9,000 per BTC
- Ratio: 1 : 3
For every dollar risked, you aim to make three.
Break-even win rate
The higher your reward relative to risk, the less often you need to be right.
Break-even win rate = 1 ÷ (1 + R), where R is the reward multiple.
| Risk : Reward | Break-even win rate |
|---|---|
| 1 : 0.5 | 66.7% |
| 1 : 1 | 50.0% |
| 1 : 1.5 | 40.0% |
| 1 : 2 | 33.3% |
| 1 : 3 | 25.0% |
| 1 : 5 | 16.7% |
These figures are before fees and slippage, which raise the required win rate slightly.
Expectancy: putting it together
Expectancy per trade = (Win rate × Average win) − (Loss rate × Average loss)
A strategy that wins 40% of the time with 1:2 risk-reward, risking $100 per trade:
- (0.40 × $200) − (0.60 × $100) = $80 − $60 = +$20 per trade
Over 100 trades, that is about $2,000 — despite losing more trades than it wins.
Why a higher ratio is not always better
Wider targets are hit less often. A 1:5 setup might have a win rate of 15%, which is below its 16.7% break-even. A 1:1.5 setup with a 50% win rate would be far more profitable. Ratio and win rate always need to be judged together, ideally from your own trade records.
Setting realistic targets
Base your take-profit on market structure — previous highs, resistance levels or measured moves — not on a desired ratio. If a trade does not offer an acceptable ratio with a logical stop and target, skip it.
Common mistakes
- Moving the stop further away to avoid being stopped out, which quietly worsens your ratio.
- Taking profit early on winners while letting losers run to the stop. Your realized ratio falls below the planned one.
- Ignoring fees. On leveraged trades, fees on the full position value meaningfully reduce reward.
Calculate it automatically
Enter a take-profit in the position size calculator to see your risk-reward ratio and profit at target alongside your position size and liquidation price.
CryptoMathly provides educational estimates only and is not financial, investment or tax advice. Crypto assets are volatile and you can lose money. Always verify figures with a qualified professional.