Risk to reward ratio explained: what win rate do you actually need?
“Only take 1:3 trades” is one of the most repeated pieces of trading advice, and one of the most misunderstood. Risk to reward only means something alongside your win rate. Put the two together and you get the number that decides whether you make money: expectancy.
What is risk to reward?
Risk to reward (R:R) compares what you could lose on a trade with what you could make. If your stop is 20 pips away and your target is 40 pips away, that's 1:2: you're risking 1 to make 2.
Traders measure results in R, where 1R is the amount risked. A full loss is -1R; hitting a 1:2 target is +2R. Using R makes every trade comparable, whatever the pips or the lot size.
The breakeven win rate
The higher your average R:R, the fewer trades you need to win just to break even:
| Average R:R | Breakeven win rate |
|---|---|
| 1:1 | 50% |
| 1:1.5 | 40% |
| 1:2 | 33.3% |
| 1:3 | 25% |
| 1:4 | 20% |
These figures are before spreads and commission, which push the breakeven slightly higher, especially on short-term trades.
Expectancy: the number that matters
45% wins at +2R, 55% losses at -1R:
(0.45 × 2) − (0.55 × 1) = +0.35R per trade
At £20 risk per trade, +0.35R is about £7 per trade on average, or about £700 over 100 trades. Positive expectancy over a decent sample (30 trades per setup at the very least) means you have an edge.
Why a higher R:R isn't always better
A 1:5 target sounds great, but further targets are hit less often. If chasing 1:5 drops your win rate to 12%, your expectancy is negative (0.12 × 5 − 0.88 = -0.28R). The best R:R is the one where your target sits at a logical level (the next liquidity, structure or session extreme) and your win rate stays healthy. Let the chart set the target, then check it's worth taking.
Planned R:R vs actual R:R
The R:R you plan and the R:R you get are often different: you close early, move stops, take partials. That gap is one of the most useful things a journal can show you. If you plan 1:2 trades but average +1.1R on winners, you're cutting winners short.
See your planned vs actual R:R
The Trader’s Ledger records your entry, stop and target, so it shows both the planned R:R and the R you actually banked, by setup and session. £19, one payment.
Get The Trader’s LedgerTo make every trade risk the same amount, read how to calculate lot size for forex and gold. On MetaTrader, TTL Risk:Reward Pro shows the R:R and the lot size as you drag your stop and target.
Frequently asked questions
What is a good risk to reward ratio?
Many traders aim for at least 1:2, but there's no universal answer. A good R:R is one that, combined with your win rate, gives positive expectancy.
What win rate do I need with a 1:2 risk to reward?
33.3% to break even, before costs. Anything above that is profitable over a large enough sample.
How do I calculate risk to reward?
Divide the distance to your target by the distance to your stop. A 40-pip target and a 20-pip stop is 40 ÷ 20 = 2, so 1:2.
Is 1:1 risk to reward bad?
Not necessarily. At 1:1 you need to win more than 50% of trades, after costs. Some high-probability setups work well at 1:1.
Educational content only, not financial advice. Trading carries a high level of risk and you can lose more than you expect. Examples use illustrative prices.