Question 1

What is a good risk-reward ratio?

Accepted Answer

A 1:2 ratio (risk $1 to make $2) is commonly cited as a minimum for systematic trading. At 1:2, you only need to be right 34% of the time to break even. Higher ratios allow for lower win rates while remaining profitable.

Question 2

How is breakeven win rate calculated?

Accepted Answer

Breakeven Win Rate = 1 ÷ (1 + R:R Ratio). At 1:2, that's 1 ÷ 3 = 33.3%. At 1:1, you need to be right 50% of the time. This tells you the minimum win rate your strategy must achieve to not lose money.

Question 3

Should I always aim for a high R:R ratio?

Accepted Answer

A higher R:R ratio is not always better. A 1:5 trade that requires price to travel far may trigger your stop loss more often. The trade-off between win rate and R:R must match your strategy. Use the Trade Expectancy Calculator to evaluate the full picture.

Question 4

What is the difference between risk-reward and trade expectancy?

Accepted Answer

Risk-reward measures a single trade. Trade expectancy accounts for your win rate across many trades: Expectancy = (Win Rate × Avg Win) − (Loss Rate × Avg Loss). A positive expectancy strategy is profitable over time.

Risk Reward Calculator

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