Risk-Reward Ratio
Risk-reward ratio compares the potential profit of a trade to its potential loss. A 1:2 risk-reward ratio means you risk $1 to potentially make $2. Most professional traders target minimum 1:2 risk-reward on their setups.
Formula
Example: Stop loss: $50 below entry. Target: $150 above entry. Risk-reward = 150/50 = 1:3.
Why it matters for traders
Risk-reward ratio determines the win rate you need to be profitable. At 1:2 R:R you only need a 33% win rate to break even. Setting minimum risk-reward thresholds is one of the most effective ways to improve trading performance without changing your setups.
How Tradapt tracks this
Add your risk-reward as a custom field or calculate it from your trade data. The Tradapt Playbook shows average risk-reward by setup so you can see which setups are meeting your minimum threshold.
Track this free in TradaptFrequently asked questions
What is a good risk-reward ratio for trading?
Most professional traders target a minimum of 1:2 risk-reward. This means they only need to be right 33% of the time to break even. Some scalping strategies use 1:1 R:R but require win rates above 60%.
How do I calculate my risk-reward before entering a trade?
Identify your stop loss level (your risk) and your target level (your potential reward). Divide the potential reward by the risk. If your stop is $50 and your target is $100, your R:R is 1:2.