How the risk reward ratio works
The risk to reward ratio compares what you can lose with what you can make on one trade:
Ratio = |Take profit − Entry| ÷ |Entry − Stop loss|
A trade that risks 30 pips to make 90 pips has a ratio of 1:3. If you risk $100 on it, the target is worth $300.
The break-even win rate
The most useful number on this page is the break-even win rate: how often a trade with this ratio must win for you not to lose money over time.
Break-even win rate = 1 ÷ (1 + Ratio)
| Risk : reward | Break-even win rate |
|---|---|
| 1 : 1 | 50% |
| 1 : 1.5 | 40% |
| 1 : 2 | 33% |
| 1 : 3 | 25% |
| 1 : 4 | 20% |
This is why many traders look for at least 1:2. They can be wrong on most trades and still grow their account, as long as they keep losses at the stop and let winners reach the target.
A high ratio is not automatically better
A far-away target is hit less often. A 1:5 trade that almost never reaches its target is worse than a 1:1.5 trade that wins most of the time. Put the stop where your idea is proven wrong and the target at a realistic level, such as the next resistance in a long trade or the next support in a short, then judge whether the ratio is worth it. The Alice scanner shows the nearest support and resistance zones for every market to help with this.
Lots and units from your risk and stop loss. Free, no sign-up.
Open the position size calculatorFrequently asked questions
What is a good risk to reward ratio?
There is no single right number, but 1:2 or better is a common minimum for trend trades. Scalpers often work with ratios near 1:1 and a higher win rate. What matters is the combination of ratio and win rate.
Should I move my stop loss to break even?
Moving the stop to entry after price has moved in your favour protects the trade, but doing it too early often gets you stopped out before the move continues. Many traders wait until price has covered at least the same distance as the original risk.
Do fees change the ratio?
Yes, slightly. Spreads, commissions and funding make every loss a little larger and every win a little smaller. On very short trades they can change the break-even win rate noticeably.
Results are estimates for education and planning. Broker contract sizes, fees and margin rules differ, so always confirm on your platform before you trade.