A trading system's profitability is a bivariate function of win rate and reward-to-risk ratio. The closed-form equation for the breakeven boundary is:
Breakeven Equation
Breakeven Win Rate (W_be) = 1 / ( 1 + R )
Where R is the realized Reward-to-Risk ratio (Average Win / Average Loss).
| Target R:R Ratio | Breakeven Win Rate | Minimum Viable Win Rate (with 3% friction) |
|---|---|---|
| 1 : 1 R:R | 50.00% | 53.00% |
| 1.5 : 1 R:R | 40.00% | 43.00% |
| 2 : 1 R:R | 33.33% | 36.33% |
| 3 : 1 R:R | 25.00% | 28.00% |
hub
Check Your Edge
Calculate your required win rate with the Breakeven Win Rate Calculator.