Courses › From Zero to Trader: The Ultimate Starter Guide
Understanding Risk-Reward Ratios
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What this lesson covers
Risk to reward is the ratio between what a trade can lose and what it can make, and it quietly determines how often you need to be right. This lesson works through the arithmetic in a way that is easy to apply. At one to one you need a high win rate simply to break even after costs. At one to three you can be wrong most of the time and still grow the account. The lesson shows how to calculate the ratio before entry, why the stop and target have to be placed by structure rather than by the ratio you want to see, and what happens when traders move a target to make the numbers look better. It closes with realistic ratios for different styles and how they fit funded account objectives.