The ratio check on every setup. Filters out the trades that aren't worth the risk — and tells you the win rate you actually need to profit.
Plug in entry, stop loss, and take profit. Out comes the ratio and the break-even hit rate.
Risk-Reward Ratio
1:2.00
Risk
50.0 pips
Reward
100.0 pips
Acceptable Setup (1.5:1 - 2:1)
Need 33% win rate to break even
A trader winning 40% of the time at 1:3 risk-to-reward beats a trader winning 60% at 1:1. R:R sets the floor on what your hit rate has to clear before you stop bleeding capital.
| Risk : Reward | Break-even win rate | Verdict |
|---|---|---|
| 1 : 1 | 50% | Coin flip — needs an edge |
| 1 : 2 | ~34% | Industry standard |
| 1 : 3 | ~25% | Tolerant of cold streaks |
| 1 : 5 | ~17% | Trend-following territory |
The take-profit has to be reachable from the chart's actual volatility, not stretched out to make the ratio look good. Pair this with the profit/loss calculator to confirm the setup is worth taking.
The dollar number behind the ratio — confirm the reward is worth the trade you're sizing.