Entry price
Stop loss
Take profit
Position size (lots)
Result
About Risk:Reward
Minimum R:R
Most professional traders aim for at least 1:2 R:R — risking $1 to make $2. This allows profitability even with a 40% win rate.
Breakeven win rate
At 1:1 R:R you need 50% wins. At 1:2 you need only 33.3%. At 1:3 you only need 25%.
Expectancy
Expected value = (Win% × Avg Win) − (Loss% × Avg Loss). Positive expectancy = profitable system over time.
Frequently Asked Questions
What is risk-reward ratio?
The risk-reward ratio (R:R) compares the potential profit of a trade to its potential loss. A 1:2 R:R means you risk $1 to potentially make $2. It is calculated as: (Take Profit distance) / (Stop Loss distance).
What is the minimum R:R ratio I should trade?
Most professional traders require at least 1:1.5 or 1:2. At 1:2, you can be profitable with only a 34% win rate. At 1:3, you only need a 25% win rate. Never take trades where the potential loss exceeds the potential gain.
How does R:R relate to win rate?
Breakeven win rate = 1 / (1 + R:R ratio). At 1:1 → 50% needed. At 1:2 → 33.3%. At 1:3 → 25%. A strategy with 1:3 R:R and 35% win rate has positive expectancy and is profitable over time.
What is trading expectancy?
Expectancy = (Win% × Average Win) − (Loss% × Average Loss). Positive expectancy means the strategy makes money over time. Example: 40% wins at $200, 60% losses at $100 = (0.4×200) − (0.6×100) = $80−$60 = $20 positive expectancy per trade.
Should I always move stop loss to break even?
Moving stop loss to breakeven after a certain profit protects capital and eliminates the original risk. However, doing it too early increases premature stop-outs. A common rule: move to breakeven once trade moves 1R in your favour.