1. What is a Profit-Loss Ratio Calculator?

Definition: This calculator determines the ratio between profit and loss, a key metric in financial analysis and trading.

Purpose: It helps investors, traders, and business owners evaluate the profitability of their investments or operations by comparing gains to losses.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• \( PLR \) — Profit-Loss Ratio (dimensionless)
• \( P \) — Profit amount (currency, e.g., USD)
• \( L \) — Loss amount (currency, e.g., USD)

Explanation: The profit is divided by the loss to determine how much profit is generated per unit of loss.

3. Importance of Profit-Loss Ratio

Details: A higher ratio indicates better profitability relative to losses. Traders often aim for ratios > 1.0, meaning profits exceed losses.

4. Using the Calculator

Tips: Enter the profit and loss amounts in your preferred currency. Loss must be greater than zero.

5. Frequently Asked Questions (FAQ)

Q1: What does a PLR of 2.0 mean?
A: It means your profits are twice as large as your losses (e.g., $200 profit for every $100 loss).

Q2: Is a higher PLR always better?
A: Generally yes, but it should be considered alongside win rate and total volume.

Q3: What's a good profit-loss ratio?
A: In trading, ratios above 1.5 are generally good, but this varies by strategy and market conditions.

Q4: Can PLR be negative?
A: No, since both profit and loss are positive values in this calculation. Negative results would indicate data entry errors.

Q5: How does PLR differ from risk-reward ratio?
A: PLR uses actual realized profits/losses, while risk-reward ratio uses expected values before trades are executed.