In this guide
Define the three values firstTwo common ratio conventionsProbability is a separate variableCosts change the real outcomeDefine the three values first
For a long model, entry sits between a lower stop and higher target. For a short model, entry sits between a higher stop and lower target. If the values are on the wrong sides, a ratio may still be numerically calculable but the model is logically inconsistent.
Two common ratio conventions
Some people say “risk/reward 1:2”; others calculate reward-to-risk and report “2.0”. They describe the same geometry if used consistently. PreBreakout displays reward-to-risk and also states the 1:R convention so the meaning is explicit.
Probability is a separate variable
A 1:3 payoff ratio can coexist with a low win rate; a 1:1 ratio can coexist with a high win rate. Without a probability estimate based on a defensible dataset, the ratio cannot tell you whether a strategy has positive expectancy.
Costs change the real outcome
Commissions, spreads, slippage, financing and taxes can change realized payoffs. The basic calculator leaves those out so the formula remains transparent. If costs matter to your use case, model them separately rather than assuming the displayed ratio is net.