Risk to reward in one line
The risk to reward ratio compares what you stand to lose with what you aim to gain. If you risk $100 to make $200, the ratio is 1 : 2. The higher the reward relative to the risk, the lower the win rate you need.
The win rate you need to break even
| Risk : reward | Win rate to break even |
|---|---|
| 1 : 0.5 | 66.7% |
| 1 : 1 | 50.0% |
| 1 : 1.5 | 40.0% |
| 1 : 2 | 33.3% |
| 1 : 3 | 25.0% |
| 1 : 5 | 16.7% |
At 1 : 2 you only need to win about one trade in three. At 1 : 1 you must win half of them. These figures ignore fees. Costs raise the break-even win rate, especially for strategies with small targets.
Why no ratio is good on its own
A 1 : 3 target sounds great, but if the price rarely reaches it, the win rate may be 15% and the strategy loses. A 1 : 0.5 target sounds poor, but with a 75% win rate it can be very profitable. Compare your win rate with the break-even rate for your ratio. If your win rate is higher, you have an edge.
Expectancy puts it together
Expectancy per trade = win rate × average win − loss rate × average loss. A 40% win rate at 1 : 2 gives 0.4 × 2 − 0.6 × 1 = +0.2R per trade. The same 40% at 1 : 1 gives −0.2R. Read more in what is expectancy in trading.
How to set targets realistically
- Base targets on where price has actually travelled in similar situations, not on a ratio you want.
- Test your real win rate at your real ratio over at least 100 trades.
- Include costs. A 1 : 1 trade with fees is worse than 1 : 1.
Enter your numbers in the risk reward and break-even win rate calculator to see expectancy, profit factor and where you sit on the break-even curve.
Try it with your own numbers
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Improve either side of the equation.
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Last updated November 2026. For education only. Not financial advice.