Cypher Assets/Learn/Risk

What isa goodrisk-to-reward ratio?

A straight answer · Risk

01The short answer
ANSWERMany traders aim for at least 1:2, meaning the target is twice as far as the stop-loss. With a 1:2 ratio you can be right only 40% of the time and still be profitable. The right ratio depends on your win rate: the two always have to be judged together.
02Key points
  • Break-even win rate at 1:1 is 50%, at 1:2 about 33%, at 1:3 about 25%.
  • Don't move your stop to force a better ratio.
  • Your backtest tells you which ratio your method supports.
03Try it

Break-even win rate

33%is the win rate you need just to break even (before costs).
04Go deeper

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05More answers
RISKHow much should you risk per trade?Day 17RISKHow do you calculate position size?Day 17GETTING STARTEDHow to start trading with no experienceDay 1GETTING STARTEDWhy do most traders lose money?Day 1
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