Profitability Calculator

How to Know if You Are Profitable in Trading

Every trader asks themselves: "Am I profitable?" This is not just about winning trades - it is about whether your overall strategy makes money over time. Our calculator gives you the honest answer by analyzing the mathematical relationship between your risk-reward ratio and win rate.

Understanding Your Trading Profitability

Trading profitability depends on two key metrics working together:

• Risk-Reward Ratio (R:R) - How much you risk versus how much you aim to gain on each trade. A 1:2 ratio means you risk $1 to potentially make $2.
• Win Rate - The percentage of your trades that close profitably. A 50% win rate means you win half your trades.

The Break-Even Formula

For any risk-reward ratio, there is a minimum win rate you need to break even. The formula is:

Required Win Rate = 1 divided by (1 + Risk:Reward Ratio)

For example, with a 1:2 R:R ratio, you need at least 33.3% win rate to break even. Anything above that, and you are profitable!

Similarly, for any win rate, there is a minimum R:R ratio needed:

Required R:R = (1 - Win Rate) / Win Rate

For example, with a 40% win rate, you need at least 1.5:1 R:R to break even.

Am I Profitable? The Answer Depends On:

• Your position relative to the curve - If your combination of R:R and win rate falls above the blue curve on our chart, you are profitable. On the curve? Break even. Below it? You are losing money over time.
• Consistency - One profitable month does not mean you are a profitable trader. Track your metrics over at least 50-100 trades.
• Realistic expectations - Many traders overestimate their win rate and underestimate their average risk-reward ratio.
• Hidden costs - Commissions, spreads, and slippage reduce your actual profitability.

Common Profitability Scenarios

• High win rate (70%+), low R:R (1:1) - Safe but requires being right most of the time. One bad streak can wipe out gains.
• Moderate win rate (45-55%), moderate R:R (1:2 to 1:3) - Balanced approach. Most professional traders fall here.
• Low win rate (30-40%), high R:R (4:1+) - Aggressive style. Few wins, but big when they hit. Requires patience and discipline.

How to Use This Calculator

• Set your typical risk-reward ratio using the first slider
• Set your historical win rate using the second slider
• Check if your point is above the curve (profitable), on it (break-even), or below (unprofitable)
• Review the metrics to understand your expected returns
• Hover over the info icons for detailed explanations of each metric
• See what R:R you need at your current win rate to be profitable
• Adjust your strategy to ensure long-term profitability

How to Improve Your Profitability

• Track every single trade with exact entry, exit, and risk amounts
• Calculate your actual historical R:R ratio (not your hoped-for ratio)
• Be honest about your true win rate over significant sample size
• Focus on improving one metric at a time - either win rate OR risk-reward
• Use proper position sizing to limit risk per trade to 1-2% of capital
• Review losing trades to identify patterns and mistakes

Why Most Traders Think They Are Profitable (But Are Not)

Cognitive biases lead traders to remember their winning trades more vividly than their losses. They might also:

• Not account for all costs (commissions, overnight fees, spreads)
• Cherry-pick their best periods when calculating returns
• Use unrealistic R:R ratios that they do not actually achieve
• Count break-even or small wins as "wins" in their win rate calculation
• Ignore the opportunity cost of capital tied up in trades

Use This Calculator to Get Real Answers

Input your actual, historical numbers - not your aspirational ones. Be brutally honest with yourself. This calculator will show you the mathematical truth about whether your strategy is profitable, break-even, or losing. If you are at or below the break-even curve, you now have the clarity to make necessary changes before continuing to lose money.

Remember: Asking "Am I profitable?" is the first step toward becoming consistently profitable. Knowledge is power in trading.