R, R:R and the break-even win rate
R is the amount you risk on the trade: the distance from entry to stop times the position size. A target twice as far from entry as the stop is a 1:2 trade, or 2R. If the trade wins a fraction w of the time, the average result is wยทRR โ (1 โ w) in units of R. Setting that to zero gives the break-even win rate 1 รท (1 + RR): 50% for 1:1, 33.3% for 1:2, 25% for 1:3.
Position size follows from the risk amount: risk รท (entry โ stop). Risking $100 on a BTC long from 82,600 with a stop at 80,000 means 0.0385 BTC, about $3,177 of notional, whatever leverage you use.
risk per unit = |entry โ stop|, RR = |target โ entry| รท risk per unit
break-even win rate = 1 รท (1 + RR)
expectancy (R) = wยทRR โ (1 โ w)Why fees change the picture
Fees are paid whether the trade wins or loses, so they shrink the reward and enlarge the risk. With 0.1% round-trip fees on $3,177 of notional the cost is about $3.2: a 1:1.5 target becomes roughly 1:1.4, and the break-even win rate rises accordingly. Funding on perpetuals and slippage on stops work the same way; tight stops on volatile coins are hit more often than the chart suggests.
Using the numbers
- Estimate your win rate honestly from past trades of the same kind, not from the best month.
- Prefer setups where the expectancy stays positive even if your win rate is 5โ10 points lower than you think.
- Several targets let you see whether taking partial profit early helps: it lowers R:R of that part but raises the chance of hitting it.
- Keep the risk per trade a small, fixed share of your account so a losing streak does not end the plan.
Frequently asked questions
+Is a higher risk-reward ratio always better?
No. Far targets are hit less often. What matters is expectancy โ the combination of R:R and win rate.
+What does 'expectancy +0.35 R' mean?
On average each trade earns 0.35 times the amount risked. With $100 at risk that is about $35 per trade over many trades.
+Does leverage change the R:R?
No. Leverage changes the margin you post, not the distances to stop and target. It does change liquidation risk and funding cost.
+Can I use it for a short?
Yes. Switch to Short: the stop must be above entry and targets below it.
+Where do I set the fee?
Enter the round-trip trading fee as a percentage of notional โ for example 0.1% if entry and exit each cost 0.05%.
Calculations run entirely in your browser; nothing you type is sent to KOT.CASH. Results are estimates for information only and are not financial, tax or legal advice.