Risk-Reward Ratio

The risk-reward ratio compares stop-loss distance against take-profit distance. Risking 20 pips to make 60 pips is a 1:3 RRR. The higher the RRR, the smaller the win rate required to be profitable: at 1:3 RRR, a trader breaks even at a 25% win rate. RRR is the strongest single lever for long-term profitability. Even a 40% win rate is highly profitable at 1:3 RRR, whereas an 80% win rate at 1:0.5 RRR is barely profitable. RRR should be measured pre-trade, not post-hoc.