The break-even win rate formula
Your risk reward ratio (R:R) is how much you make on an average winner for every unit you lose on an average loser. Your break-even win rate is the win rate at which those wins and losses cancel out exactly:
break-even win rate = 1 ÷ (1 + R:R)
It comes straight from expectancy. Measure everything in R, so the average loss is −1 and the average win is R:R. Expectancy is WR × R:R + (1 − WR) × (−1). Set that to zero and solve: WR × (1 + R:R) = 1, so WR = 1 ÷ (1 + R:R).
Above the break-even win rate, your trades made money on average. Below it, they lost money on average. Check a specific trade's ratio with the risk reward calculator.
Break-even win rate table: R:R from 0.5 to 5
Every cell below is 1 ÷ (1 + R:R), rounded to one decimal place. "Losses you can afford" is the share of trades that can lose while you still break even.
| Risk : reward | Break-even win rate | Losses you can afford |
|---|---|---|
| 1 : 0.5 | 66.7% | 33.3% |
| 1 : 0.75 | 57.1% | 42.9% |
| 1 : 1 | 50.0% | 50.0% |
| 1 : 1.25 | 44.4% | 55.6% |
| 1 : 1.5 | 40.0% | 60.0% |
| 1 : 1.75 | 36.4% | 63.6% |
| 1 : 2 | 33.3% | 66.7% |
| 1 : 2.5 | 28.6% | 71.4% |
| 1 : 3 | 25.0% | 75.0% |
| 1 : 3.5 | 22.2% | 77.8% |
| 1 : 4 | 20.0% | 80.0% |
| 1 : 4.5 | 18.2% | 81.8% |
| 1 : 5 | 16.7% | 83.3% |
Two things stand out. First, the gains are steep at the low end: going from 1 : 0.5 to 1 : 1 drops the required win rate by 16.7 points. Second, they flatten at the high end: going from 1 : 4 to 1 : 5 only drops it by 3.3 points, while targets that far away are typically reached less often.
These break-even figures hold after costs only if your R:R already includes commissions and slippage. Measure R:R from your actual results, not your planned targets.
When a high win rate loses money
Take a trader who wins 75% of the time. That sounds strong. Their average win is $40 and their average loss is −$150, so their realised R:R is 40 ÷ 150 ≈ 0.267.
Break-even win rate = 1 ÷ (1 + 0.2667) = 78.9%.
Their 75% is below that. Expectancy confirms it:
0.75 × 40 + 0.25 × (−150) = 30 − 37.50 = −$7.50 per trade.
Three wins out of every four, and the account still shrinks on average. This pattern often comes from closing winners early and holding losers in the hope they recover.
When a low win rate makes money
Now a trader who wins only 35% of the time. Their average win is $250 and their average loss is −$100, an R:R of 2.5.
Break-even win rate = 1 ÷ (1 + 2.5) = 28.6%.
Their 35% is above it. Expectancy:
0.35 × 250 + 0.65 × (−100) = 87.50 − 65 = +$22.50 per trade.
They lose almost two trades in three and still make money on average over the sample. The catch is psychological: long losing runs are a normal part of a profile like this, and many traders abandon it during one. Sizing each trade small with the position size calculator makes those runs survivable.
Distance from break-even is what matters
Being above break-even is necessary, but the size of the margin tells you how robust it is. Compare two profiles in R:
| Profile | Break-even | Your win rate | Margin | Expectancy |
|---|---|---|---|---|
| 1 : 2, 40% WR | 33.3% | 40% | +6.7 pts | 0.40 × 2 + 0.60 × (−1) = +0.2R |
| 1 : 1, 55% WR | 50.0% | 55% | +5.0 pts | 0.55 × 1 + 0.45 × (−1) = +0.1R |
The lower win rate has the larger margin and twice the expectancy per trade.
Margins shrink fast in practice. Suppose your plan is 1 : 2 and you win 36%, a small cushion over 33.3%. If slippage trims winners by 10% (to 1.8R) and stretches losses to −1.1R, expectancy becomes 0.36 × 1.8 + 0.64 × (−1.1) = −0.056R. A thin edge on paper turned negative in execution.
Common mistakes with this table
- Using planned targets. A plan of 1 : 3 means little if most winners are closed at 1 : 1.2. Look up the break-even for the ratio you actually achieve.
- Ignoring losses beyond 1R. If your average loss is −1.3R because of gaps and late exits, your real ratio is lower than the planned one and the break-even win rate is higher.
- Mixing setups. A scalp at 1 : 0.75 and a swing trade at 1 : 3 need very different win rates (57.1% and 25.0%). Averaging them produces a number that describes neither.
- Treating break-even as a target. Sitting exactly on the line means you make nothing for the effort. The aim is a clear margin above it, measured over enough trades to be meaningful.
- Reading it as a forecast. The table is arithmetic. It tells you what win rate a ratio requires, not what win rate you will get.
Finding your own numbers
Planned R:R and realised R:R are different things. To see where you actually stand:
- Record every trade's result as an R-multiple using your initial stop.
- Compute your win rate and your average win and average loss in R.
- Realised R:R = avg win ÷ |avg loss|.
- Look up the break-even win rate for that R:R in the table above, or compute 1 ÷ (1 + R:R).
- Compare it with your actual win rate, and note the trade count.
Do this per setup. One setup can sit well above its break-even line while another sits below it. The trading journal spreadsheet has the columns, and the win rate guide covers how to count wins consistently.