Free Narrow CPR Stock Scanner: Daily Shortlist for Breakout Trades
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Most traders decide their target after they're already in the trade. This tool โ and the logic behind it โ forces you to do it before you click buy.
The reward to risk ratio compares how much you stand to gain on a trade against how much you're risking to find out if you're right. It's calculated as (Target Price โ Entry Price) รท (Entry Price โ Stop-Loss Price). A ratio of 2:1 means your potential profit is twice your potential loss. Traders use this number before entering a trade, not after, because it decides whether a setup is worth taking even if your win rate isn't very high.
Reward to Risk Ratio (R:R) is the amount you expect to make on a trade divided by the amount you're prepared to lose if it goes wrong.
Ask a new trader why they entered a trade and you'll usually get an answer about the setup โ a breakout, a bounce off support, an indicator crossing. Ask them what their target was, and the answer is often vague: "wherever it goes," or a number picked because it looked round on the chart. That gap is where most accounts bleed out slowly. The setup decides if you enter. The reward to risk ratio decides whether the trade is worth entering at all โ and it's the one number that has to be fixed before the order goes in, not adjusted afterward to make a losing trade feel better.
A setup tells you when a trade may be worth considering. Risk management tells you how much that idea is allowed to cost you. Reward to risk sits between the two โ it tells you whether the potential payoff is even worth the exposure you're about to take. It also helpt to identify Break-even win rate needed example 33.3%.
Here's where it gets interesting: a trader who wins only 4 out of 10 trades can still be solidly profitable, and a trader who wins 8 out of 10 can still be losing money, month after month, without understanding why. The difference isn't skill at picking direction. It's the ratio between what each winning trade pays and what each losing trade costs.
The formula itself is simple. The discipline of using it before every entry is the part that's hard.
Reward to Risk Ratio = (Target โ Entry) รท (Entry โ Stop-Loss)
For a short trade, reverse the direction: Reward = Entry โ Target, and Risk = Stop-Loss โ Entry.
Three numbers go into this, and all three should exist before you place the order: your entry price, your stop-loss (the price at which the setup is proven wrong, not the price you're willing to tolerate emotionally), and your target (a level with actual technical reasoning behind it โ a resistance zone, a prior swing high, a measured move โ not a number that simply looks satisfying).
Enter your entry, stop-loss, and target below. The ratio updates as you type.
Example, NIFTY50 index is trading near or around Central Pivot Range and gives a breakout candle above the CPR top with volume support. Price sustains above the level on the next candle instead of slipping back inside โ that's the confirmation, not the first candle alone.
Entry: โน220 (option premium). Stop-loss: โน200, placed below the level that would invalidate the breakout structure โ not an arbitrary โน15 or โน20 buffer. Target: โน260, based on the next visible resistance zone on the chart, not a round number.
Risk here is โน20 per unit. Reward is โน40 per unit. That's a 2:1 ratio, which means the trade only needs to work roughly one out of every three attempts to break even, before accounting for the trades that work more often than that.
Traders tend to focus on one of these two numbers and ignore the other. Both matter, and the relationship between them is what actually determines whether a strategy is profitable.
| Reward to Risk Ratio | Break-Even Win Rate Needed | Practical Read |
|---|---|---|
| 1 : 1 | 50% | For Probability, You need to be right more often than a coin flip just to survive. |
| 2 : 1 | 33.3% | You can be wrong twice for every one time you're right and still break even. |
| 3 : 1 | 25% | A low win-rate strategy can still be strongly profitable if this ratio holds. |
| 1 : 2 | 66.7% | You need to be right two out of three times just to avoid losing money. |
Yahan problem strategy ki nahi, execution ki hai โ the strategy is often fine; the problem is entering trades where the ratio was never worth the risk in the first place.
This is where most beginners go wrong, and it's rarely about the math itself.
The ratio is calculated once, before entry. Widening the stop-loss because the trade is moving against you doesn't just increase risk โ it silently changes a 2:1 trade into a 1:1 or worse, without the trader ever recalculating it.
A round number, a percentage gain, or "double my premium" is not a target โ it's a wish. A target needs a technical reason: a resistance zone, a prior high, a measured move from the pattern.
A breakout is not automatically a trade. If the nearest resistance is barely above the entry, the reward to risk on that specific setup is poor even if the pattern itself is textbook. The pattern earns attention; the ratio earns the entry.
Confidence in a setup and the math of a setup are two separate questions. A trader can be right about direction and still lose money over time if every trade risks โน30 to make โน15.
Most experienced intraday traders look for at least 1.5:1, with 2:1 or higher preferred where the chart structure supports it. The "right" ratio depends on your win rate โ a lower win-rate strategy needs a higher ratio to stay profitable, while a high win-rate strategy can work with a smaller one.
Yes. The ratio only measures the payoff structure, not the probability of the setup working. A 3:1 trade based on a random guess is still a poor trade โ the ratio and the setup quality both need to hold up together.
Trailing a stop-loss to protect profit is different from moving your original target. It's reasonable to trail the stop as price moves favorably; it's not reasonable to keep widening the stop-loss when the trade is moving against you, since that quietly worsens your ratio.
No single trade guarantees anything. The ratio matters over a series of trades, not one outcome. It tells you what the strategy needs to achieve on average across many attempts, not what will happen on the next one.
Reward to risk tells you whether a trade's payoff structure is worth taking. Position sizing tells you how many units or lots to trade so that the rupee amount you're risking matches your account's per-trade risk limit. Both are needed together โ a good ratio with an oversized position can still cause damaging losses.
Because options carry theta decay working against the buyer, many options traders look for a slightly higher ratio than equity or futures traders โ often 2:1 or above โ to compensate for the additional cost of time.
Before you think about the target, know exactly how much you are willing to lose if the setup fails. Then work out what the trade needs to pay you to make that risk worthwhile. Run every setup through the calculator above before the order goes in โ not after the trade is already open and the numbers are harder to look at honestly.
If you want a structured, chart-based framework for applying risk-reward logic to CPR breakouts specifically, the CPR Brahmastra webinar walks through the entry, confirmation, and stop-loss rules step by step.
Explore the CPR Brahmastra WebinarThis article is for educational purposes only and does not constitute investment advice. Trading in the securities market involves risk of loss. Past performance and hypothetical examples are not indicative of future results. Please consult your financial advisor and read all scheme-related documents carefully before investing. SEBI registration and compliance details available on request.
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