What separates profitable traders from losing ones?
It’s not how often they win—it’s how much they make when they win compared to how much they lose.
That’s the power of the risk-to-reward ratio (R:R).
In this post, you’ll learn how to use R:R to filter trades, plan targets, and turn average setups into long-term profit.
📊 What Is Risk-to-Reward Ratio (R:R)?
Risk-to-reward ratio compares how much you’re risking to how much you aim to gain on a trade.
📌 Formula:
javaCopyEditRisk-to-Reward Ratio = Potential Loss / Potential Profit
🧮 Example:
- Risk: 30 pips
- Reward: 90 pips
- R:R = 1:3
This means you’re risking 1 unit to potentially gain 3.
📈 Why R:R Matters More Than Win Rate
Even with a low win rate, you can still be profitable if your R:R is high.
| Win Rate | R:R 1:1 | R:R 1:2 | R:R 1:3 |
|---|---|---|---|
| 50% | Breakeven | Profitable | Very profitable |
| 40% | Losing | Small profit | Strong profit |
| 30% | Losing | Breakeven | Profitable |
📌 Lesson: You don’t need to win often—you need to win smart.
🎯 How to Choose the Right R:R Per Setup
- For trending markets → use 1:2 to 1:3 or more
- For range-bound setups → consider 1:1.5 to 1:2
- For high-confidence breakouts → go 1:4+ if structure allows
🎯 Your strategy defines the average R:R, but you should never trade below 1:1.
🛠️ How to Apply R:R in Your Trading
- Set your stop-loss based on structure or volatility
- Multiply that distance by 2 or 3 → this is your minimum TP
- If the TP level makes sense on the chart → take the trade
- If not → skip the trade or wait for a better setup
💡 If you can’t get a good R:R, the trade is not worth it.
⚠️ Common Mistakes to Avoid
- Setting R:R based on hope, not price structure
- Moving stop-loss further away just to match your R:R
- Taking trades with poor reward relative to risk (e.g. risking 50 pips for 30)
🧠 Tip: Combine R:R with Win Rate Expectations
If your strategy wins 50% of the time and your average R:R is 1:2 → you’re consistently profitable.
Use a trading journal or spreadsheet to track your:
- Win rate
- Avg. risk per trade
- Avg. reward
- Actual R:R across trades
🎯 Final Thoughts
Risk-to-reward is not just a number—it’s a mindset.
It keeps you focused on quality over quantity, protects you from overtrading, and helps you stay profitable even when you lose more often than you win.
🎥 Learn How We Plan Trades with R:R
👉 Watch our real setups with R:R logic on the
📺 FXDoctor YouTube Playlist