Risk-to-reward ratio
How much you aim to make for each unit you risk. Quality of the ratio changes how often you need to win.
What it is
If you risk $1 to make $2, your reward-to-risk is 2:1 (2R). With 2R targets you can be wrong more often than you are right and still profit. But the ratio must be realistic: a target that price rarely reaches does not help.
Always measure it after fees. A 0.1% round-trip fee on a 0.3% stop is a third of an R.
How to use it
- Define entry, stop and target before you trade.
- Compute reward ÷ risk using a realistic target at a real level.
- Skip setups under 1.5R after fees.
- Scale out: take part at 1R and move the stop to break-even.
Good trades pay more than they risk.
Common mistakes
- Moving targets closer because you are nervous.
- Moving the stop further away to improve the ratio on paper.
- Ignoring fees.
Practise it in TradeDesk X
TradeDesk X plans show TP1, TP2, TP3 and the R:R. Micro uses a break-even stop at 1R, a trail at 1.8R and a 2.5R target.
Related lessons
🛡
Win rate and expectancy
A strategy is profitable only if the average trade is positive. Win rate alone says nothing.
🛡Stop placement and ATR
A stop belongs where your idea is wrong, outside normal noise.
Educational content only. Nothing here is financial advice or a recommendation to buy or sell anything. Trading leveraged products can lose more than you deposit. Practise with paper trading first and never risk money you cannot afford to lose.