Guide · 2 min read
Risk reward ratio explained, with the win rate you need
Short answer: The risk reward ratio compares your stop with your target. At 1:2 you aim to win twice what you risk, and you break even before costs if one trade in three wins. The ratio alone says nothing about profit: it only tells you which win rate you need, and costs raise that need.
Published: 24 October 2026.
Free, no sign-up On sale: the Monthly Pass and the Lifetime Pass. See the plans
Every trade has two numbers: how much you lose if the stop is hit and how much you win if the target is hit. The ratio between them sets the bar your win rate has to clear.
The win rate each ratio needs
Break-even win rate = 1 ÷ (1 + reward ÷ risk), before costs.
- 1:1 → 50%
- 1:1.5 → 40%
- 1:2 → about 33%
- 1:3 → 25%
Above that line a set of trades makes money over time; below it, it loses, however good the ratio looks.
Why a high ratio is not enough
A far target is reached less often than a near one. Push the target out and the ratio climbs, but the win rate usually falls. The two move together, so judge them together, on enough trades, with every cost inside. Our guide on how much to risk per trade shows what losing streaks do at each win rate.
Costs move the line
Take a 1:2 plan on gold with a 3 dollar stop and a 6 dollar target, as an example. A spread of 0.30 dollars costs a tenth of the stop on every trade. Wins shrink to 5.70, losses grow to 3.30, and the real ratio is closer to 1:1.7. The break-even win rate rises from 33% to about 37%. Small stops suffer most. See the gold spread guide and the gold swap guide.
Measure in R
Divide each trade's result by the money it risked. A win of 250 on 100 risked is +2.5R; a full stop is −1R. Averaging R across many trades gives the expectancy of your rules, whatever the lot sizes were. Then the position size calculator keeps 1R the same amount of money on every trade.
Test a ratio on past candles
A Baroq AI agent lets you set the stop distance and the target. Its Lab tries variations of your idea on past candles and shows the part it was not picked on on its own, so you see how a ratio held up away from the data that chose it. The past does not tell you what comes next.
The Monthly Pass and the Lifetime Pass are software licences for your own MetaTrader account. They score every robot and strategy you run the same way, with costs inside every number. See the plans.
FAQ
What is a risk reward ratio?
How far your target is compared with your stop. A 1:2 ratio means you aim to win twice what you risk: a 5 dollar stop on gold with a 10 dollar target.
What win rate do I need to break even?
Before costs, 1 divided by (1 + reward/risk). At 1:1 that is 50%, at 1:2 about 33%, at 1:3 25%. Costs push each number up.
Is a 1:3 risk reward ratio good?
Only if the target is hit often enough. A far target is reached less often, so the win rate usually falls as the ratio rises. What matters is the result of both together after costs.
What is an R multiple?
A trade's result divided by the money it risked. Risk 100 dollars and make 250, and the trade is +2.5R. Measuring in R lets you compare trades of different sizes.
Do costs change the ratio?
Yes. The spread, commission and swap come off every win and add to every loss. On a small stop they can turn a 1:2 plan into something closer to 1:1.7.
Should I move my target to improve the ratio?
Only if your tests show the farther target still gets hit often enough. Moving it on paper improves the ratio and can quietly ruin the win rate.
Gold EA Checking Kit, $9
Every check from these articles, on one printable page.
An educational tool. It is not investment advice. Trading leveraged products such as gold CFDs carries a high risk of losing money, and you can lose all of it.
BaroqTech makes software. It is not investment advice and it does not manage money. Trading leveraged products such as gold CFDs carries a high risk of losing money, and you can lose all of it. Results from a test or from a demo account do not predict results on a real account.
Free book · PDF · 7 pages
The Loss Limit Handbook
How to pick a daily limit and a floor, size trades so a normal losing streak cannot reach them, and a one-page plan to print.