Risk/reward ratio and position size calculator for crypto

Risk/reward and position size calculator

The formulas

Risk per unit      = |entry − stop|
Reward per unit    = |target − entry|
Risk/reward (R)    = reward per unit ÷ risk per unit
Amount at risk     = account × risk %
Position size      = amount at risk ÷ risk per unit
Break-even win rate = 1 ÷ (1 + R)     (before fees)

The break-even win rate shows how often a strategy must win just to stay even:

Fees, funding and slippage push the real number higher, so a strategy that looks fine on paper can still lose money.

Worked example

Account 10,000 USD, risk 1% per trade, so the amount at risk is 100 USD. A long on BTC/USDT with entry 75,776.80, stop 74,661.18 and target 78,231.16:

• Risk per unit = 75,776.80 − 74,661.18 = 1,115.62
• Reward per unit = 78,231.16 − 75,776.80 = 2,454.36
• R:R = 2,454.36 ÷ 1,115.62 ≈ 2.2, so 1 : 2.2
• Position size = 100 ÷ 1,115.62 ≈ 0.0896 BTC

These are the figures on the plan card of a real tradeagentio screenshot, shown here only to illustrate the arithmetic.

What is a good risk/reward ratio?

There is no universal answer. It depends on your win rate: a strategy that wins 60% of the time can be profitable at 1 : 1, while one that wins 30% needs about 1 : 2.4 or better. Many traders look for at least 1 : 2 before taking a trade, but a high ratio is worthless if the target is unrealistic. Judge targets by where price has actually reacted, for example the next support or resistance level or opposite liquidity.

Where to put the stop

Place the stop where the idea is wrong, not where the loss looks comfortable. For example, beyond an order block or beyond the swing that failed, with some room for noise (many traders use a multiple of the average true range). Then let the stop distance decide the position size, as in the formula, instead of picking a size first.

Leverage and liquidation

Leverage does not change the risk/reward ratio of a trade, which depends on entry, stop and target only. It changes how much margin you post and how close the liquidation price is. On an isolated position, a rough estimate for a long is entry × (1 − 1 ÷ leverage), so at 10x about a 10% adverse move liquidates the position, a little less once maintenance margin and fees are included. Exchanges publish exact formulas. Your stop must sit well before the liquidation price, or it will not protect you.