How it works
Risk is the distance between entry and stop-loss, reward the distance between entry and target. The calculator shows the ratio as risk : reward, so 1:3 means the target is three times as far away as the stop. The break-even win rate is risk / (risk + reward): at 1:3 you need to be right on 25% of your trades to come out even, before costs. The expected value is given in R, where 1 R is the amount you risk per trade: EV = win rate × reward / risk − (1 − win rate). At a 45% win rate and 1:3, that is +0.8 R per trade on average.
The calculator works for long and short trades: for a long, the target sits above the entry and the stop below it; for a short, the other way round. The result is only as good as your win rate estimate, and that estimate is the hard part. Wider targets are usually hit less often, so ratio and win rate are not independent. The model also ignores commissions, spreads, slippage and stops that fill at a worse price after a gap. A positive expected value on paper is no guarantee of a profit, especially over a small number of trades.