Risk / Reward
Compare the potential upside with the downside before entering a position.
How to use it Enter your intended entry, downside exit and upside target in pence. Optional costs are entered per share for the whole round trip.
Risk : reward
Before costs.
- Breakeven win rate
- 25%
- Risk per share
- 10p
- Reward per share
- 30p
- Price downside
- 20%
- Price upside
- 60%
Targets and planned exit prices are not guaranteed.
Why it matters
A big price target means little if the downside is just as large.
An entry at 50p, an exit at 40p and a target at 80p gives 10p of risk and 30p of reward: 1 : 3. The breakeven win rate is 25% before costs; profitability requires more than that.
How it's calculated
Reward = target − entry − costs
Breakeven win rate = risk ÷ (risk + reward) × 100
Costs are a round-trip estimate in pence per share, applied to either outcome. Price upside and downside are shown before those costs. This is a long-only model with a target above entry and an exit below it.
Assumptions & limitations
An exit level is not a guaranteed execution price. The actual gain/loss ratio depends on realised outcomes, not target prices. Include estimated spread, fees and slippage in costs where appropriate. The model has one winning and one losing outcome and does not estimate their probabilities.