What the ratio tells you
A 1:2 ratio means you aim to make two units of profit for every unit you risk. The higher the ratio, the fewer winning trades you need.
Break-even win rate = 1 ÷ (1 + reward/risk)
Example: At 1:2 you break even by winning 33.3% of trades. At 1:1 you need 50%, and at 1:3 just 25%.
Expectancy
Expectancy combines win rate and ratio into the average result per trade, measured in R (multiples of your risk). A positive number means the strategy makes money over many trades.
Expectancy (R) = win rate × reward/risk − loss rate
Frequently asked questions
What is a good risk reward ratio?
Many traders look for at least 1:1.5 or 1:2, but the right ratio depends on your win rate. A high win-rate strategy can be profitable at 1:1.
Should I always aim for 1:3?
Wider targets get hit less often. Check your real win rate in a journal and use expectancy, not ratio alone.