Trading Basics

R:R ratio explained

Risk/Reward ratio

Quick definition: R:R is the ratio between the amount you could lose (the distance to your stop loss) and the amount you could gain (the distance to your take profit) on a trade.

R:R = 1:3 means risking 1 dollar for an expected gain of 3 dollars.

With an R:R of 1:2, you only need to win more than 1/3 of your trades to break even (before fees). That's why professional traders prioritize R:R over win rate.

Avoid trades with an R:R below 1:1.5 unless you have a clear edge.

💡 Example

Stop loss 2% from entry, take profit 6% away: R:R = 1:3. Lose 2 trades (−4%), win 1 trade (+6%) and you are still up 2%.

📊 Calculate position size and R:R →

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Educational content for reference only, not financial advice. Leveraged trading carries the risk of losing your entire capital.