Glossary · Risk & money management
Risk:reward ratio
Also called: risk:reward, risk/reward
The potential loss compared with the potential gain. Risking 30 pips to make 60 is 1:2.
At 1:2 you need to win just over 33% of trades to break even before costs.
In practice
Risking 25 pips to make 50 is 1:2. At that ratio a trader breaks even, before costs, by winning just over a third of trades.
Chasing very high ratios such as 1:5 on every trade. Distant targets are hit less often, so the win rate drops.
Try the risk:reward calculator
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