BullWhat is the risk/reward ratio?
Risk/reward (R:R) compares the distance from your entry to your target with the distance from your entry to your stop loss. A 1:2 trade risks 1 to make 2. It does not depend on leverage or size, only on the three prices.
How to use it
- Enter your entry and stop loss. A stop below entry is treated as a long, above as a short.
- Add one to three take profit levels. Leave a field empty if you do not use it.
Formula
Example
Long at 100, stop at 95 (risk 5). Targets at 105, 110 and 115 give R:R of 1:1, 1:2 and 1:3.
R:R and win rate
The higher the reward per trade, the fewer trades you need to win to break even. Before fees, the break-even win rate is 1 / (1 + R).
| R:R | Win rate needed to break even |
|---|---|
| 1 : 1 | 50% |
| 1 : 1.5 | 40% |
| 1 : 2 | 33.3% |
| 1 : 3 | 25% |
A high R:R is only useful if the target is realistic. A 1:5 target that is almost never reached can be worse than a 1:1.5 target that is reached most of the time.
Frequently asked questions
What is a good risk/reward ratio?
Many traders look for at least 1:1.5 or 1:2, but the right number depends on how often your setups reach the target.
Does leverage change R:R?
No. Leverage changes the size of profits and losses in USDT, but the ratio between them stays the same.
How do I combine R:R with position size?
Use the position size calculator to set your risk in USDT, then R:R tells you the profit at each target in multiples of that risk.
Results are estimates for education only and are not financial advice. Always check the numbers on your exchange before you trade.
Risk/Reward and Win Rate: The Math Behind Profitable Trading
How risk/reward ratio and win rate work together, the break-even win rate for each R:R, and why a high R:R alone does not make a strategy profitable.