Mastering the Risk/Reward Ratio
The Risk/Reward (R:R) ratio marks the difference between gambling and trading. It compares your potential loss to your potential gain.
What is a Good R:R?
Most traders target a minimum of 1:2.
- You risk $1 to make $2.
- With a 1:2 ratio, you only need to be right 34% of the time to be profitable!
How to Calculate
- Risk: Entry Price - Stop Loss Price
- Reward: Target Price - Entry Price
- Ratio: Reward / Risk
Visualize your trade setups with the Risk Reward Calculator.