Risk-Reward Ratio
Why risk-reward ratio matters and how to use it for long-term profitability.
Last reviewed: 2026-03-06
Article content
Overview
Risk-reward (R:R) is the ratio of potential profit to potential loss. A 1:2 trade risks $100 to make $200. Even with a 50% win rate, 1:2 is profitable. A 1:1 ratio needs 55%+ wins to break even. Aim for at least 1:1.5, preferably 1:2 or higher.
Calculating Rr
Measure from entry to stop loss (risk) and entry to take profit (reward). R:R = reward / risk. Example: 20 pip stop, 40 pip target = 1:2. Use our risk-reward calculator to compute exact dollar amounts.
Application
Only take trades that meet your minimum R:R. If the logical stop is 30 pips but the target is only 20 pips, skip the trade or find a better entry. Quality over quantity.
Knowledge check
1 of 3With a 1:2 risk-reward ratio and 50% win rate, you are:
FAQ
Common questions about this topic.
What is a good risk-reward ratio?
Minimum 1:1.5. Many pros aim for 1:2 or higher. Depends on your win rate and strategy.
Can I have a high win rate with low R:R?
Yes, but you need a very high win rate to be profitable. 70% wins at 1:1 barely breaks even after costs.
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