Risk-Reward Ratio — the Math That Forgives Mistakes
7/6/2026
risk-management
guide
R:R compares potential loss to potential gain. At 1:2 you can be wrong 60 percent of the time and still profit.
Level by level
Beginner
Before entry, measure: distance to stop vs distance to target. If the reward isn't at least 1.5x the risk, the trade must earn its place some other way — usually it can't.
Intermediate
Breakeven win rate = 1 divided by (1 + R). 1:1 needs 50 percent wins; 1:2 needs 33; 1:3 needs 25. Pick setups whose historical win rate clears the bar with room.
Advanced
High R:R and high win-rate trade off; scalpers live at 1:1 with 65 percent wins, trend traders at 1:4 with 35. Both work — mixing their expectations is what fails.
Common mistakes
- Chasing 1:10 setups that trigger twice a year
- Cutting winners at 1:0.5 while letting losers run to the stop
Practise & tools
_Educational content only — not financial advice. Historical behaviour never guarantees future results._
Keep learning — free tools