Risk-reward ratio
The risk-reward ratio compares the distance to target with the distance to stop. It defines the win rate your strategy needs just to break even. Run this calculation now: how to measure your own performance
Calculation and minimum win rate
If the stop is 20 points away and the target 60, R:R is 3:1. The break-even win rate is 1 ÷ (1 + R): at 3:1, 25%; at 2:1, 33%; at 1:1, 50%; at 1:2, 67%. That table alone explains why trading against the ratio demands a precision almost nobody has.
The R:R that matters is the realised one, not the planned one. A trader who exits halfway out of anxiety is trading 1:1 with a 3:1 plan — and the trade journal is the only place where that gap becomes visible.
Why a high R:R is not enough
Distant targets lower the win rate: demanding 5:1 usually drops accuracy below the required minimum and the result gets worse. What decides is the combination, measured by expectancy, not R:R alone.
Feasibility matters too: a 60-point target on an instrument that moves 30 points all day is not R:R, it is hope. Always compare the target with the instrument's average range in your trading hours.