BullRisk/Reward and Win Rate: The Math Behind Profitable Trading
BullCalc Team · · 3 min read
Two numbers decide whether a trading strategy makes money over time: how often you win, and how much you win compared to how much you lose. Looking at only one of them is one of the most common mistakes traders make.
Risk/reward in one sentence
Risk/reward (R:R) compares the distance to your target with the distance to your stop. If your stop is 2% away and your target 6% away, the trade is 1:3. You risk one unit to make three.
The break-even win rate
For any R:R there is a win rate where you neither make nor lose money (before fees). It is 1 divided by (1 + R).
| R:R | Break-even win rate |
|---|---|
| 1 : 0.5 | 66.7% |
| 1 : 1 | 50% |
| 1 : 2 | 33.3% |
| 1 : 3 | 25% |
| 1 : 5 | 16.7% |
A trader using 1:3 setups can lose most of their trades and still make money, as long as they win more than one in four.
Expectancy: putting it together
Expectancy tells you what you make on average per trade, measured in R (units of risk):
Example: a 40% win rate with 1:2 trades gives 0.4 x 2 - 0.6 x 1 = 0.2R per trade. Risking 50 USDT per trade, that is 10 USDT on average every time you take a setup.
Why chasing a high R:R can backfire
It is tempting to set every target far away to get a beautiful 1:5 ratio. The problem is that far targets are reached less often. If moving the target from 1:2 to 1:5 drops your win rate from 45% to 12%, your expectancy turns negative even though the ratio looks better.
The right target is one the market can realistically reach, based on structure like resistance levels, not one picked to make the numbers look nice.
Partial take profits
Many traders split the exit across several targets, for example a third at 1R, a third at 2R and the rest at 3R. This raises the chance of banking something while keeping some exposure for a big move. The risk/reward calculator shows the R:R of up to three targets at once.
Track your own numbers
The only win rate that matters is yours. Keep a simple log of each trade's planned R:R and result. After 50 to 100 trades you will know whether your setups have a positive expectancy, and that is worth more than any rule of thumb.
Risk / Reward Ratio Calculator
Measure how much you can make on each target compared to what you lose if the stop is hit.
Open the calculatorThis article is for education only and is not financial advice.